Chart of Accounts Malaysia — How to Set One Up for Your Sdn Bhd (2025)

What Is a Chart of Accounts — and Why Every Sdn Bhd Needs a Proper One

Your chart of accounts is the skeleton of your bookkeeping system. It's the master list of every account your business uses — each with a code, a name, and a category. Every transaction your bookkeeper records gets posted to one of these accounts.

Get it right: clean books, accurate management accounts, painless LHDN filing. Get it wrong: your auditor spends their first week fixing your records, your tax computation has errors, and your bank loan application stalls because nobody can produce a clear P&L.

This matters especially in Malaysia because LHDN's tax assessment rules require specific account separations — capital assets by class, disallowed expenses isolated, director loans properly categorised. A generic COA doesn't do this. A Malaysia-localised one does.

If you're unclear on the difference between bookkeeping and accounting, our bookkeeping vs accounting guide for Malaysian SMEs explains both roles clearly before you set up your accounts.

Standard Malaysian SME COA Structure — 5 Categories, 5 Code Ranges

The standard numbering system uses a 4-digit code with the first digit indicating the category. Here's the structure every Malaysia-localised COA should follow:

• 1000–1999 — Assets. Current assets (cash, bank accounts, AR, inventory) and fixed assets (plant, machinery, vehicles, computers). Each capital asset class needs its own account for Schedule 3 capital allowance computation.
• 2000–2999 — Liabilities. Current liabilities (AP, SST payable, accruals) and long-term liabilities (bank loans, hire purchase). Director loan accounts belong here as a liability — not in equity.
• 3000–3999 — Equity. Share capital, retained earnings, current year profit/loss. Dividends declared also sit here.
• 4000–4999 — Revenue. Sales, service income, other operating income (rental, commissions). Separate accounts for each revenue stream you need to track independently.
• 5000–5999 — Expenses. This is where most of the work is. Cost of goods sold (5000–5099), payroll (5100–5199), operating expenses (5200–5499), and LHDN-relevant disallowed categories (5500–5599) each need their own sub-range.

Sample Chart of Accounts for a Malaysian Sdn Bhd — Reference Table

Here's a working reference COA covering the accounts most Malaysian SMEs need. This is a starting point — your accountant will adjust based on your industry and transaction volume.

Code	Category	Account Name	Notes / LHDN Relevance
1010	Asset	Cash on Hand	Petty cash float
1020	Asset	Bank — Current Account	Primary operating bank account
1030	Asset	Bank — Savings Account	Reserve / float account
1100	Asset	Accounts Receivable (Trade)	Customer invoices outstanding
1110	Asset	Deposits Paid	Rental deposits, utility deposits
1200	Asset	Inventory / Stock on Hand	Trading companies; valued at cost
1300	Asset	Prepayments	Insurance, subscriptions paid in advance
1500	Asset	Plant & Machinery	Capital allowance: Schedule 3 — 14% AA
1510	Asset	Motor Vehicles	Capital allowance: Schedule 3 — 20% AA (RM50k cap for saloon cars)
1520	Asset	Computer Equipment & Software	Accelerated Capital Allowance (ACA) — 100% in year 1
1530	Asset	Office Furniture & Equipment	Capital allowance: Schedule 3 — 10% AA
1540	Asset	Renovation & Fitting-Out	Capital allowance: 10% AA on qualifying costs
2010	Liability	Accounts Payable (Trade)	Supplier invoices outstanding
2020	Liability	Accrued Expenses	Costs incurred but not yet invoiced
2030	Liability	SST Payable	Service Tax / Sales Tax collected, not yet remitted
2040	Liability	EPF Payable	Employer EPF contribution due
2050	Liability	SOCSO / EIS Payable	Employer SOCSO / EIS contribution due
2100	Liability	Director Loan Account	Money owed TO or BY the director — liability if director lent to company; asset if company lent to director (reclassify to 1400 in that case)
2200	Liability	Bank Loan — Current Portion	Loan repayment due within 12 months
2300	Liability	Hire Purchase — Current Portion	HP instalment due within 12 months
3010	Equity	Share Capital	Paid-up capital (RM1 minimum for Sdn Bhd)
3020	Equity	Retained Earnings	Accumulated profits from prior years
4010	Revenue	Sales Revenue	Product sales / service billings
4020	Revenue	Other Operating Income	Rental income, commission, interest received
5010	Expense	Cost of Goods Sold	Direct cost of products sold / direct service delivery cost
5110	Expense	Salaries & Wages	Gross salary; allowable LHDN deduction
5120	Expense	EPF — Employer Contribution	Allowable; 13% / 12% of gross salary
5200	Expense	Rent & Utilities	Office / premises rent, electricity, water, internet
5210	Expense	Professional Fees	Auditor, company secretary, legal — allowable
5220	Expense	Marketing & Advertising	Fully allowable if business-purpose; keep receipts
5500	Expense	Entertainment (Disallowed)	LHDN Section 39 — 50% or fully disallowed; ring-fence here for add-back in Form C
5510	Expense	Penalties & Fines (Disallowed)	LHDN penalties, traffic fines — 100% disallowed; never mix with other expenses

Your accountant may use different code ranges — there's no single mandated standard. What matters is that every account has a clear purpose and that capital assets and disallowed expenses are never lumped into catch-all accounts.

Why Your COA Must Support LHDN Corporate Tax Computation

Most SME directors in KL and Penang think of the COA as a bookkeeping tool. It is. But it's also the foundation of your annual tax computation. Here's where it matters:

Capital allowances require per-asset-class accounts. Schedule 3 of the Income Tax Act 1967 applies different annual allowance (AA) rates to different asset types — computers get accelerated allowance (100% in year 1), motor vehicles get 20%, plant and machinery get 14%. If all your fixed assets sit in one "Fixed Assets" account, your tax agent cannot compute the correct capital allowance by class. They'll estimate — or charge you to reclassify everything first.

Disallowed expenses must be ring-fenced. Entertainment, penalties, private motor vehicle costs, and club subscriptions are partially or fully disallowed under LHDN rules. If these are mixed into general operating expenses, your accountant has to review every transaction to identify and add back the disallowed amounts. That's time. That's cost. Ring-fencing them in dedicated accounts (5500–5599 in the example above) makes Form C computation clean and auditable.

For a full list of what LHDN allows and disallows, see our guide on tax deductions Malaysian SMEs always miss.

How Accounting Software Sets Up COA — SQL, Autocount, and Xero

The three most common accounting platforms in Malaysian SMEs each handle COA differently:

SQL Accounting ships with a Malaysia-localised default COA that covers standard SME accounts and SST tax codes. The structure is familiar to Malaysian accountants. The gap: capital allowance asset classes aren't always split at the level LHDN requires — you'll need to add sub-accounts for computer equipment vs plant vs motor vehicles if they're bundled. Strong for manufacturing and trading businesses in Johor Bahru and Shah Alam. Accountant-friendly because most Malaysian SME accountants know SQL's account structure.

Autocount also ships with a Malaysian template and is widely used by SME bookkeepers across Penang, KL, and Kuala Terengganu. The default COA is solid but similarly generic on capital asset splits. Autocount's strength is its deep integration with Malaysian payroll (EPF/SOCSO/EIS codes pre-built) — which SQL also has but Autocount handles more granularly at the account level.

Xero has a Malaysia-specific chart of accounts template but it's less complete than SQL or Autocount for Malaysian tax compliance specifics. Xero's default Malaysian COA doesn't include LHDN-specific disallowed expense categories or e-invoice document type accounts. It's fine for service businesses that mainly need clean P&L reporting — but requires more customisation for manufacturing, trading, or any business with capital assets. If you're using Xero and planning to file with LHDN, work with your accountant to add the missing categories.

For a full comparison of accounting software options in Malaysia — including MyInvois integration status — see our accounting software Malaysia guide.

Basic COA vs Full COA — When to Upgrade

Not every business needs 200 accounts on day one. Here's a practical guide to what each stage looks like and when to move up:

Feature	Basic COA (10–15 accounts)	Full COA (50+ accounts)
Best for	Micro-business, sole prop, new startup with one revenue stream	Active Sdn Bhd with employees, multiple revenue lines, or capital assets
Asset accounts	Bank, AR, one fixed asset account	Separate accounts per asset class (machinery, vehicles, computers, renovation)
Expense accounts	General operating expenses (one or two accounts)	Payroll, rent, marketing, professional fees, capital allowance classes, disallowed expenses — all separated
LHDN compliance	Adequate for simple operations, but capital allowances need manual breakdown	Full Schedule 3 capital allowance computation supported; disallowed expenses ring-fenced
Management accounts	Basic P&L and Balance Sheet only	Full management accounts pack including cost centre analysis and margin by product line
e-Invoice alignment	May not have separate accounts for e-invoice document types	Separate accounts for e-invoice sales, credit notes, debit notes — matches MyInvois categories
When to upgrade	—	When you hire staff, buy capital assets, hit RM500k revenue, or prepare for bank financing

The upgrade cost is minimal — a few hours with your accountant or bookkeeper to restructure. The cost of not upgrading is incorrect capital allowances, messy LHDN filings, and audit overruns.

How to Customise Your COA for Your Industry

The template above covers most businesses. But F&B, retail, and professional services each have specific needs:

F&B (restaurants, cafes, food manufacturers). Add sub-accounts under COGS for food ingredients, packaging, and delivery — so you can track food cost percentage by category. Add a separate account for halal certification fees (relevant if you're maintaining JAKIM certification). If you have multiple outlets in KL and Petaling Jaya, use cost centre codes within each account rather than duplicating the COA for each outlet.

Retail (physical or e-commerce). Separate accounts for returns and allowances under Revenue (reduces gross sales). Inventory requires sub-accounts by product category if you're managing multiple SKUs. If you're on Shopee or Lazada, add a Platform Fees account under expenses — these are allowable deductions but often buried in bank statements without a dedicated account.

Professional services (consulting, IT, accounting firms). No inventory needed, but work-in-progress (WIP) billing is important — add an Unbilled Revenue or WIP asset account to track services rendered but not yet invoiced. Separate accounts for subcontractor payments (allowable but need careful documentation for LHDN if paying non-residents — withholding tax applies).

Common COA Mistakes Malaysian SMEs Make

Five mistakes that cost SME directors time and money every tax season:

1. Mixing personal and business accounts. Directors in Penang and KL do this constantly — personal groceries, car maintenance, and family travel tagged to "general expenses." LHDN will disallow them all. Worse, your auditor flags it as a potential Section 140A ITA 1967 transfer pricing issue if the director is also a related party. Keep a dedicated director personal expenses account and review it monthly.

2. Using one "General Expenses" account for everything. Your accountant cannot compute capital allowances, identify disallowed items, or produce department-level reporting if every expense lands in a single bucket. Minimum split: payroll, rent, professional fees, marketing, and one residual "Miscellaneous" account for genuine one-offs.

3. Misclassifying the director loan account. Director loan accounts belong in Liabilities (if the director lent money to the company) or in a separate Current Asset (if the company lent money to the director). Putting them in Equity distorts your balance sheet. LHDN also scrutinises director loan accounts closely — if the company makes interest-free loans to directors, there may be a deemed benefit-in-kind implication.

4. No separate accounts for e-invoice transaction categories. Since e-invoice compliance rolled out, MyInvois requires separate document types — invoices, credit notes, debit notes, and self-billed invoices. If your COA doesn't have matching account codes, reconciling your MyInvois submissions against your accounting records becomes a manual nightmare. Add them early. See our monthly management accounts guide for how these reconciliations show up in the monthly close process.

5. Using a foreign template without localising it. UK, Australian, and US COA templates don't have LHDN-specific categories, Malaysian capital allowance asset classes, or SST payable accounts. Starting from a foreign template and leaving it unmodified is the most common root cause of messy books in Sdn Bhd companies incorporated with foreign software or advisors.

If you're outsourcing your bookkeeping and not sure whether your provider has set up the COA correctly, our guide on outsourcing bookkeeping in Malaysia includes a checklist of what to ask your provider before signing the engagement.

Frequently Asked Questions