How to set up a chart of accounts for a Malaysian small business
A practical chart of accounts for a Malaysian SME, with a sample list you can adapt for a trading company or a café, and the mistakes that make year end painful.
A chart of accounts is the numbered list of every account your business records transactions in, grouped into assets, liabilities, equity, income and expenses. For a Malaysian SME, start with 40 to 80 accounts, include local ones such as SST payable and EPF, SOCSO and EIS payable, and match your MPERS or MFRS financial statements.
Most Malaysian SME owners meet the chart of accounts (carta akaun) the first time their accountant asks why "Miscellaneous" holds RM 40,000, or why the profit and loss account looks nothing like the business they run. The chart of accounts decides how every ringgit is sorted. Set it up sensibly once and your monthly reports, SST returns and year-end accounts become much easier.
What is a chart of accounts?
A chart of accounts is the list of all the accounts your bookkeeping uses, each with a name and usually a number. Every transaction in double-entry bookkeeping is posted to accounts on this list.
Think of it as the filing system for your money. Your profit and loss statement and balance sheet are simply these accounts added up and arranged in a standard order.
Do Malaysian businesses have to follow a standard chart of accounts?
No. There is no chart of accounts prescribed by law for Malaysian private companies, so you design your own. What is required is that your records can produce proper financial statements, and LHDN expects you to document the chart you use.
- The Companies Act 2016 (section 245) requires a company to keep accounting records that sufficiently explain its transactions and financial position and allow true and fair profit and loss accounts and balance sheets to be prepared and audited. Section 244 requires directors to ensure the financial statements follow the applicable approved accounting standards.
- For most Malaysian private companies, those standards are MPERS (Malaysian Private Entities Reporting Standard), issued by the Malaysian Accounting Standards Board (MASB). A private entity may choose MFRS instead. Your chart of accounts should make it easy to produce statements in whichever framework your company uses.
- LHDN's Public Ruling No. 4/2000 (Revised) says that where computers are used to keep records, the system documentation, including the accounting manual and the chart and code of accounts, should be maintained.
How is a chart of accounts structured?
Accounts are grouped into five types, and most Malaysian SMEs number them in blocks so the type is obvious from the code. A four-digit scheme is common and leaves room to grow.
| Code range | Account type | Shows up in | Examples |
|---|---|---|---|
| 1000–1999 | Assets | Balance sheet | Cash at bank, trade receivables, inventory, equipment |
| 2000–2999 | Liabilities | Balance sheet | Trade payables, SST payable, bank loan, amount due to director |
| 3000–3999 | Equity | Balance sheet | Share capital, retained earnings |
| 4000–4999 | Income | Profit and loss | Sales, service income, other income |
| 5000–6999 | Expenses | Profit and loss | Cost of sales, rent, salaries, utilities |
Within each block, leave gaps (1010, 1020, 1030) so you can add an account later without renumbering everything.
What accounts should a Malaysian SME include?
Start with the accounts your business actually uses, plus the Malaysia-specific liabilities that come with employing staff and charging tax. The sample below is illustrative and suits a small Klang Valley trading company; adapt the names to your business.
| Code | Account | Type |
|---|---|---|
| 1010 | Cash in hand (petty cash) | Asset |
| 1020 | Cash at bank: current account | Asset |
| 1100 | Trade receivables | Asset |
| 1200 | Inventory | Asset |
| 1300 | Deposits and prepayments | Asset |
| 1500 | Office equipment | Asset |
| 1510 | Accumulated depreciation: office equipment | Asset (contra) |
| 2010 | Trade payables | Liability |
| 2100 | Accruals | Liability |
| 2200 | SST payable | Liability |
| 2300 | EPF payable | Liability |
| 2310 | SOCSO payable | Liability |
| 2320 | EIS payable | Liability |
| 2330 | PCB (monthly tax deduction) payable | Liability |
| 2400 | Amount due to director | Liability |
| 2500 | Income tax payable | Liability |
| 3010 | Share capital | Equity |
| 3100 | Retained earnings | Equity |
| 4010 | Sales: products | Income |
| 4020 | Sales: delivery charges | Income |
| 4900 | Other income | Income |
| 5010 | Purchases / cost of sales | Expense |
| 6010 | Salaries and wages | Expense |
| 6020 | EPF, SOCSO and EIS (employer) | Expense |
| 6100 | Rent | Expense |
| 6110 | Electricity and water | Expense |
| 6200 | Marketing and advertising | Expense |
| 6300 | Entertainment | Expense |
| 6400 | Bank charges | Expense |
| 6500 | Professional fees (audit, tax, secretarial) | Expense |
| 6600 | Depreciation | Expense |
Only add SST payable if you are registered for SST; the SST guide explains when that applies. The payroll liabilities hold what you've deducted from staff or owe as employer until you pay it over.
How should a café or service business change the sample?
Keep the same five blocks and change the income and cost accounts to match how you actually earn and spend. Split income where you need to see it separately, not by every product.
A Penang café, for example, might use:
| Code | Account | Why |
|---|---|---|
| 4010 | Sales: dine-in | Track the core business |
| 4020 | Sales: delivery platforms | Platform sales are usually paid out net of commission |
| 4030 | Sales: catering | Often invoiced on credit, so it creates receivables |
| 5010 | Food and beverage ingredients | Main cost of sales |
| 5020 | Packaging | Grows with takeaway and delivery |
| 6050 | Delivery platform commission | Shows what the platforms really cost |
How many accounts should a small business have?
As few as you need to answer the questions you actually ask. For most Malaysian SMEs that is somewhere around 40 to 80 accounts; a sole proprietor with simple operations may need fewer.
Too few and everything lands in "General expenses". Too many and staff post the same cost to three different places. A useful test: if you wouldn't look at the account separately in a monthly report, it probably doesn't need to exist.
What are the most common chart of accounts mistakes?
The usual problems are catch-all accounts, mixing personal and business spending, and accounts that don't line up with the financial statements.
- A large "Miscellaneous" or "Suspense" balance. Every ringgit there has to be investigated at year end. Clear it monthly.
- No account for money owed to or by the director. In a Sdn Bhd, the director paying a company bill personally should be recorded as an amount due to the director, not as an expense with no other side.
- Entertainment mixed into general expenses. Some expenses, entertainment among them, are treated differently for income tax. Keeping them separate saves your tax agent from going through receipts line by line.
- Renaming accounts mid-year. Changing what an account means breaks comparisons. Add a new account and stop using the old one.
- Accounts that don't map to the statements. Each account should roll up into one line of the MPERS or MFRS financial statements. If you can't say which line, the account needs rethinking. See how to read your financial statements.
Do I need to build a chart of accounts from scratch?
Usually not. Most accounting software starts you with a default chart of accounts that you can rename, add to and switch off.
In HumbleBear, for example, a standard chart of accounts is set up for you, and the journals are generated from your invoices, bills and payments as you work, so you mostly adjust the list rather than build it. See HumbleBear accounting software. Either way, review the chart with your accountant before your first month-end close, not after your first year end.
Frequently asked questions
What is carta akaun?
Carta akaun is the Bahasa Malaysia term for chart of accounts: the numbered list of accounts a business uses to record its transactions. It is the same thing your accountant or accounting software calls the chart of accounts.
Is there an official LHDN or SSM chart of accounts?
No. Neither LHDN nor SSM prescribes a chart of accounts for private businesses. The Companies Act 2016 requires records that support true and fair financial statements, and LHDN's public ruling on keeping sufficient records says computerised systems should keep documentation including the chart and code of accounts.
Should SST be its own account?
Yes, if you are SST-registered. SST you charge is not your income; it is owed to the government, so it belongs in a liability account such as SST payable until you pay it. Keeping it separate makes your SST return easier to prepare and check.
Can I change my chart of accounts later?
Yes, but add and retire accounts rather than renaming existing ones mid-year, and avoid deleting accounts that already have transactions. The best time to restructure is at the start of a financial year, after talking to your accountant.
Does my chart of accounts need to follow MPERS?
MPERS sets out what your financial statements must show, not the exact account names you use day to day. Your chart of accounts just needs to roll up cleanly into the statements, whether your company reports under MPERS or MFRS.
Sources
- Companies Act 2016 (Act 777), reprint, sections 244 and 245: Suruhanjaya Syarikat Malaysia (SSM)
- MASB: MPERS issued for private entities, effective 1 January 2016
- MASB: Private entities may apply either MPERS or MFRS
- LHDN Public Ruling No. 4/2000 (Revised): Keeping Sufficient Records (Companies & Co-operatives)
