What is a chart of accounts and how should I set one up?
A chart of accounts is the list of categories you use to record every transaction, grouped into assets, liabilities, equity, income and expenses. Set it up so it matches your business and the headings you need in the financial statements and tax computation.
Think of it as the filing system for your money.
Main groups
- Assets: bank, receivables, stock, equipment
- Liabilities: payables, accruals, loans, tax payable, EPF and SOCSO payable
- Equity: share capital, retained earnings
- Income: sales by product or service line
- Expenses: cost of sales, payroll, rent, utilities, professional fees, depreciation
Setting it up
- Start from a standard template in your software
- Delete accounts you will never use
- Add accounts for items you need to track separately, such as director's current account, SST, entertainment (often partly non-deductible), and donations
- Number accounts by group so reports sort properly
- Keep it short; 50 to 100 accounts suit most SMEs
Rules of thumb
- One account per type of cost, not per supplier
- Do not use a catch-all "miscellaneous" account for large amounts
- Separate items that are treated differently for tax, because it saves effort when preparing the tax computation
- Record changes to the chart so the year-on-year comparison stays valid
Legal basis
- Companies Act 2016, s.245
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
- 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.
- Do sole proprietors and partnerships in Malaysia need to keep books?Yes. The Income Tax Act requires anyone with business income to keep sufficient records to work out their income. LHDN has a separate public ruling for businesses that are not companies. The Companies Act rules apply only to companies.
- Is there a simpler accounting standard for very small or micro companies?MPERS is already the simplified standard, and it is the lightest framework in common use for Malaysian companies. There is no further exemption that lets a very small company skip financial statements or the accounting framework, though some disclosures and audit rules differ for small companies.
- 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.
- 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.