How to read a profit and loss statement and balance sheet (Malaysia)
Your accountant sends the statements, you check the bottom line and file them away. Here is how Malaysian business owners can read the rest in fifteen minutes.
A profit and loss statement (penyata untung rugi) shows whether your Malaysian business made money over a period: revenue, minus cost of sales, minus running expenses, equals profit. A balance sheet (kunci kira-kira) is a snapshot on one date of what the business owns, owes, and what belongs to the owners. Read both to judge profit, cash and risk.
Many Malaysian business owners look at one number on their financial statements, the profit at the bottom, and stop there. That misses most of what the statements tell you: whether prices cover costs, whether customers pay on time, and whether you could survive a slow quarter. You don't need accounting training to read a profit and loss statement (penyata untung rugi) or a balance sheet (kunci kira-kira, also called the penyata kedudukan kewangan). You need to know what each section means and which few figures to compare.
This guide uses one illustrative Penang company, Perkakasan Jelutong Sdn Bhd, a small hardware trading business, to show how the two statements work and how they connect.
What is the difference between a P&L and a balance sheet?
A profit and loss statement covers a period and tells you whether you made a profit. A balance sheet covers a single date and tells you what the business owns and owes.
| Profit and loss statement | Balance sheet | |
|---|---|---|
| Bahasa Malaysia | Penyata untung rugi | Kunci kira-kira / penyata kedudukan kewangan |
| Also called | P&L, income statement, statement of profit or loss | Statement of financial position |
| Covers | A period, such as a month or a year | A single date, such as 31 December |
| Answers | Did we make money? | What do we own and owe right now? |
| Main parts | Revenue, costs, expenses, profit | Assets, liabilities, equity |
How do I read a profit and loss statement?
Read it from the top down: revenue, then the direct cost of what you sold, then running costs, and finally profit. Each subtotal answers a different question about the business.
| Perkakasan Jelutong Sdn Bhd, year ended 31 December 2025 | RM |
|---|---|
| Revenue | 600,000 |
| Cost of sales | (360,000) |
| Gross profit | 240,000 |
| Salaries and EPF/SOCSO contributions | (120,000) |
| Shop rent | (36,000) |
| Marketing | (12,000) |
| Utilities and internet | (9,000) |
| Depreciation | (8,000) |
| Other expenses | (5,000) |
| Operating profit | 50,000 |
| Finance costs (loan interest) | (4,000) |
| Profit before tax | 46,000 |
| Tax expense | (11,000) |
| Net profit | 35,000 |
The figures are illustrative. Line by line:
- Revenue is what you billed customers for the period. Under accrual accounting, it counts when you invoice, not when the customer pays.
- Cost of sales is the direct cost of what you sold: stock, materials, subcontractors. It moves with sales.
- Gross profit (untung kasar) is what is left to pay for everything else. Here it is 40% of revenue (RM240,000 ÷ RM600,000). This is your gross margin, and it tells you whether your pricing works.
- Operating expenses are the costs of running the business whether you sell a lot or a little. Depreciation spreads the cost of equipment over its useful life; no cash leaves the bank for it this year.
- Operating profit shows how the core business performs before loans and tax.
- Net profit (keuntungan bersih) is the bottom line: RM35,000, about 5.8% of revenue. The tax line is the company's income tax for the year, which a Sdn Bhd declares to LHDN; see our guide to corporate tax for SMEs.
What should I look out for in a P&L?
Compare each figure with last year rather than judging it alone. In particular, check:
- Gross margin. If it falls from 40% to 34%, either supplier prices rose or you discounted more. Investigate this first.
- Expenses growing faster than revenue. If revenue rose 10% but salaries rose 25%, ask why.
- Monthly trend. A yearly P&L hides seasonality, such as the run-up to Chinese New Year or Hari Raya. Monthly figures show which months lose money.
How do I read a balance sheet?
Start with the rule that it always balances: assets equal liabilities plus equity. Then look at what can turn into cash soon compared with what must be paid soon.
| Perkakasan Jelutong Sdn Bhd, as at 31 December 2025 | RM |
|---|---|
| Equipment and delivery van (after depreciation) | 72,000 |
| Inventory | 45,000 |
| Trade receivables (customers who owe you) | 80,000 |
| Cash at bank | 38,000 |
| Total assets | 235,000 |
| Trade payables (suppliers you owe) | 52,000 |
| Tax payable | 11,000 |
| Accrued expenses | 7,000 |
| Bank loan due within 12 months | 12,000 |
| Bank loan due after 12 months | 40,000 |
| Total liabilities | 122,000 |
| Share capital | 50,000 |
| Retained earnings | 63,000 |
| Total equity | 113,000 |
| Total liabilities and equity | 235,000 |
Everything the business owns was paid for either by someone it owes (liabilities) or by its owners (equity). That rule comes straight from double-entry bookkeeping.
- Assets are current (cash, or things that turn into cash within a year, such as stock and receivables) or non-current (equipment, vehicles, property).
- Liabilities are split the same way. Current liabilities are due within 12 months.
- Equity is the owners' stake: share capital paid in, plus profits kept in the business over the years (retained earnings).
What should I look out for in a balance sheet?
The main question is whether the business can pay what it owes in the next twelve months. Check:
- Cash against current liabilities. The company has RM38,000 cash but RM82,000 due within the year, so it depends on collecting receivables and selling stock.
- Receivables growing faster than sales. That usually means customers are paying more slowly. See how Malaysian SMEs can get paid faster.
- Inventory piling up. Stock that doesn't move ties up cash and may need writing down.
- Negative equity. If liabilities exceed assets, the business has lost more than its owners put in. Banks will notice when you apply for financing.
How are the P&L and balance sheet connected?
Net profit from the P&L is added to retained earnings on the balance sheet. Perkakasan Jelutong started the year with RM28,000 of retained earnings, made RM35,000 profit and paid no dividend, so it ends with RM63,000.
This is also why profit is not cash: the company made RM35,000 profit, yet customers still owe it RM80,000.
Which financial ratios should a Malaysian SME owner check?
Five ratios cover most of what an owner needs. Compare them with your own figures from last year and last quarter, because the right level differs by industry.
| Ratio | How to calculate | Perkakasan Jelutong | What it tells you |
|---|---|---|---|
| Gross margin | Gross profit ÷ revenue | 40% | Whether pricing covers direct costs |
| Net margin | Net profit ÷ revenue | 5.8% | How much of each ringgit of sales you keep |
| Current ratio | Current assets ÷ current liabilities | 163,000 ÷ 82,000 = 2.0 | Ability to pay bills due within a year |
| Quick ratio | (Current assets − inventory) ÷ current liabilities | 118,000 ÷ 82,000 = 1.4 | The same, without relying on selling stock |
| Receivable days | Trade receivables ÷ revenue × 365 | About 49 days | How long customers take to pay on average |
What financial statements must a Sdn Bhd file with SSM?
A Malaysian private company must prepare financial statements each year, circulate them to members within six months of its financial year end, and lodge them with SSM within thirty days of circulating them. The Companies Act 2016 sets this out:
- The directors must prepare financial statements within six months of the financial year end (section 248). They must be audited before they go to members, unless the company qualifies for SSM's audit exemption for certain private companies.
- A private company must circulate the financial statements and reports to members within six months of its financial year end (section 258).
- It must lodge them with SSM within thirty days of circulation (section 259).
Most private entities report under the Malaysian Private Entities Reporting Standard (MPERS) issued by the Malaysian Accounting Standards Board, or opt for the full MFRS. A revised MPERS applies to financial periods beginning on or after 1 January 2027, so ask your accountant whether it changes anything for you.
Sole proprietors and partnerships registered with SSM don't lodge financial statements in the same way, but they still need proper accounts to declare income to LHDN.
How can I see my P&L and balance sheet during the year?
Keep your bookkeeping current and you can run both reports at any time. Annual statements arrive months after year end, too late to act on. If sales are invoiced, bills entered and the bank reconciled every month, a monthly P&L and balance sheet show problems while there is still time to fix them. Accounting software such as HumbleBear produces both reports from the invoices, bills and payments you already record.
Frequently asked questions
What is a profit and loss statement called in Bahasa Malaysia?
It is the penyata untung rugi, and the balance sheet is the kunci kira-kira, also called the penyata kedudukan kewangan. The English and Malay versions contain the same information.
Is profit the same as cash in the bank?
No. Profit counts sales when you invoice and expenses when you incur them, while cash only moves when money is paid or received. Unpaid invoices, stock purchases and loan repayments all make cash and profit differ.
Why is my business profitable but always short of cash?
Usually because the profit is tied up in receivables or inventory, or went into loan repayments or equipment. Check whether trade receivables and inventory grew during the year. If customers are paying slowly, tightening your collection process is often the quickest fix.
What is retained earnings on a balance sheet?
Retained earnings is the total of all profits the company has made since it started, minus losses and dividends paid. It belongs to the owners but stays in the business. It is not a pile of cash; it may already be spent on stock, equipment or other assets.
Does a Sdn Bhd have to lodge its financial statements with SSM?
Yes. Under the Companies Act 2016, a private company must circulate its financial statements to members within six months of its financial year end and lodge them with SSM within thirty days of circulation. Your company secretary and auditor usually handle the filing, but the directors are responsible.
Sources
- Companies Act 2016 (Act 777), sections 248, 258 and 259, Suruhanjaya Syarikat Malaysia
- Practice Directive 3/2017: Qualifying criteria for audit exemption for certain categories of private companies, SSM
- About the Malaysian Private Entities Reporting Standard (MPERS), Malaysian Accounting Standards Board
- MPERS (2025), Malaysian Accounting Standards Board
