How should a small business account for stock and inventory?
Record stock at the lower of cost and net selling price. Count it at least at year end, use a consistent cost method such as first-in-first-out or weighted average, and write down damaged or slow items. Stock errors change profit directly.
Core rule under MPERS and MFRS: inventory is valued at the lower of cost and estimated selling price less costs to complete and sell.
Steps
- Record purchases and track goods received against supplier invoices
- Choose a cost method: first-in-first-out (FIFO) or weighted average. Last-in-first-out is not allowed under these standards
- Do a physical stock-take at year end, and a cycle count during the year for larger stock
- Compare the count to the records and investigate differences
- Write down items that are damaged, expired or obsolete
- Include stock in transit that you own, and exclude goods held for others
Why accuracy matters
- Closing stock reduces cost of sales, so an overstated count inflates profit and tax
- Banks and auditors scrutinise it
- Stock theft and wastage show up as unexplained differences
Stock-take evidence
Keep dated, signed count sheets and cut-off notes, because the auditor or tax officer may ask for them.
Service-only businesses generally do not hold inventory, but unbilled work in progress can need similar attention.
Legal basis
- MPERS Section 13 (Inventories)
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.