Should my Malaysian company use cash or accrual accounting?
Companies must use accrual accounting in their financial statements, because MPERS and MFRS both require it. You can track cash during the year for convenience, but the books must recognise income when earned and expenses when incurred.
Cash basis: record income when money arrives and expenses when you pay.
Accrual basis: record income when you earn it (usually when you invoice or deliver) and expenses when you incur them, whether or not cash has moved.
Why it matters:
- A company's financial statements under MPERS or MFRS must be on the accrual basis, so a limited company cannot stay on pure cash basis for statutory accounts
- Accrual shows what you are owed (receivables), what you owe (payables), accrued costs and prepayments
- Tax follows accounting profit with adjustments, so accrual numbers feed the tax computation
- Cash flow is still important; the statement of cash flows and a simple cash forecast show it
For very small sole proprietors, a cash-based record may be acceptable for tax in some cases, but ask a tax adviser; the rules are not identical for every taxpayer.
A practical middle path is to keep the day-to-day books on cash and have month-end adjustments for receivables, payables and accruals. Most accounting software supports accrual by default.
Legal basis
- Companies Act 2016, s.248
- MPERS Section 2 (accrual basis)
Sources
Applies to 2026 · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- What is the difference between bookkeeping and accounting in Malaysia?Bookkeeping is the day-to-day recording of transactions: sales, purchases, payments and receipts. Accounting uses those records to prepare financial statements, interpret results and support decisions and tax filing. Good bookkeeping comes first, because accounts can only be as reliable as the entries beneath them.
- Is a Sdn Bhd legally required to keep accounting records?Yes. Section 245 of the Companies Act 2016 requires every company, including its directors and managers, to keep accounting and other records that explain its transactions and financial position. This applies even to a new, dormant or loss-making company.
- How long must a Malaysian company keep its accounting records?A company must keep accounting records for seven years after the transactions they record were completed. For tax, documents must be kept for seven years from the end of the relevant year of assessment. Use whichever period ends later.
- What documents should a Malaysian company keep for bookkeeping?Keep every document that proves a transaction: sales and purchase invoices, receipts, bank statements, contracts, payroll records, and records of assets and loans. If a transaction is not supported by a document, it is hard to defend in an audit or tax review.
- Can I keep accounting records and receipts in digital form only?Electronic records are accepted if they are complete, readable, accessible and can be converted into writing. Documents issued electronically, such as e-Invoices, can stay electronic. If you scan a paper original, the Income Tax Act says to keep the paper original as well.