# What Counts as an Accounting Record Under Section 245

> What section 245 of the Companies Act 2016 actually requires of a Malaysian company's accounting records, who is personally liable, and why the conveniently-and-properly-audited standard survives audit exemption.

- Category: accounting
- Language: en
- Status: published
- Updated: 2026-07-20
- Canonical: https://negaraku.md/en/accounting/accounting-records-section-245

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Almost every Malaysian guide to accounting records says the same two things: keep
them for seven years, and enter transactions within sixty days. Both are true. Both
are the least interesting parts of section 245.

The interesting parts are the standard the records have to meet, the fact that the
duty lands personally on the chief executive whether or not he is a director, and a
subsection that quietly outlives audit exemption.

## What the section actually says

Section 245(1) of the Companies Act 2016 puts the duty on **a company, the directors
and managers of a company**, and requires two distinct things:

- **s.245(1)(a)** — cause to be kept the accounting and other records **to
  sufficiently explain the transactions and financial position of the company** and
  enable true and fair profit and loss accounts and balance sheets, and any documents
  required to be attached to them, to be prepared; and
- **s.245(1)(b)** — cause those records to be kept **in a manner as to enable them to
  be conveniently and properly audited**.

That is a function test, not a list. The Act never enumerates what an accounting
record is. It says what the records have to be capable of doing. If a reader of your
ledger cannot follow a transaction from its origin to the figure in the financial
statements, the records do not sufficiently explain it, however tidy the trial
balance looks.

In practice that reaches at least to:

| Layer | Examples |
| --- | --- |
| Books of account | General ledger, sub-ledgers, journals, trial balance |
| Source documents | Sales invoices, purchase invoices, receipts, payment vouchers, credit notes, debit notes |
| Banking | Bank statements, reconciliations, cheque butts, transfer advices |
| Assets | Fixed asset register, depreciation schedules, title documents, hire purchase agreements |
| Inventory | Stock count sheets, valuation workings, goods received and delivery notes |
| People | Payroll registers, EPF, SOCSO, EIS and PCB submissions, employment contracts |
| Contracts | Customer and supplier contracts, leases, loan and facility agreements, related party agreements |
| Judgements | Impairment assessments, provision calculations, going concern assessments, valuation reports |

The last row is the one companies forget. Where a financial statement figure rests on
an estimate, the record that sufficiently explains it is the working that produced
the estimate — not the resulting number.

## The two clocks

**Entries: 60 days.** Section 245(2) requires appropriate entries to be made in the
accounting and other records **within sixty days of the completion of the
transactions** to which the entries relate. Note the trigger. It is completion of the
transaction, not receipt of the invoice, not month end, and not the date your
outsourced bookkeeper gets the box of documents.

**Retention: 7 years.** Section 245(3) requires the records to be retained for seven
years **after the completion of the transactions or operations** to which the entries
relate.

That anchor differs from the tax rule. Section 82(1)(a) of the Income Tax Act 1967
runs seven years from the end of the year to which the income relates, and section
82(1A) extends it where no return has been filed. For a transaction completed in
January, the two clocks are nearly a year apart. Keep to the later of them.

## Who is personally liable

This is where section 245 is unlike most of the record-keeping provisions in the Act.

The duty in s.245(1) is imposed on three parties: the company, **the directors**, and
**the managers**. Section 2 defines a manager as *the principal executive officer of
the company for the time being by whatever name called and whether or not he is a
director*. That is the CEO, the managing director, the general manager — the person
actually running the company. Being off the board is not a shield.

Section 245(9) then provides that **the company and every officer** who contravene
the section commit an offence and are liable on conviction to a fine **not exceeding
RM500,000** or imprisonment **not exceeding three years**, or both. Officer is
defined broadly in section 2 and includes any director, secretary or employee of the
corporation.

For a public company or a subsidiary of a public company, section 246 layers a
further duty on the directors to maintain a system of internal control giving
reasonable assurance that assets are safeguarded and transactions properly
authorised and recorded. A director who contravenes section 246 faces imprisonment up
to three years or a fine up to RM1,000,000, or both.

## The subsection that outlives audit exemption

Section 245(1)(b) requires records to be kept so they can be **conveniently and
properly audited**. Nothing in that subsection is conditional on an audit actually
happening.

A company that qualifies for audit exemption under SSM Practice Directive 10/2024 is
relieved of the obligation to have its financial statements audited. It is not
relieved of section 245. The standard of record-keeping is unchanged, and the phrase
that defines it is a standard written by reference to an audit.

That is not a theoretical point. Under the audit exemption regime, members holding
5 per cent of the shares, 5 per cent of the members by number, or the Registrar can
require the company to audit a financial year on notice. If that notice arrives, the
company has to produce records for a period it has already closed, to a standard it
may have assumed no longer applied. The saving on audit fees evaporates and is
usually exceeded by the cost of a reconstruction exercise.

## Where the records live

Section 245(4) requires records to be kept at the registered office **or at such
other place as the directors think fit**, and to be **open at all times for
inspection by the directors**. There is no requirement to keep them at the registered
office, and no requirement to notify SSM of the location — which surprises people who
expect a lodgement.

Records of operations outside Malaysia may be kept outside Malaysia under s.245(5),
subject to conditions. That is a separate topic with its own traps, particularly for
companies on cloud ERP hosted offshore.

## Common mistakes

- **Treating the seven years as running from the financial year end.** Section 245(3)
  runs from completion of the transaction. So does nothing else in Malaysian law,
  which is exactly why it gets missed.
- **Applying the 60-day rule to minutes.** Section 245(2) is about accounting
  entries. Section 341 imposes a seven-year retention period on the records it
  governs but sets no entry deadline.
- **Assuming the finance director carries the risk alone.** The duty is on directors
  and on the principal executive officer, and the offence provision reaches every
  officer.
- **Reading audit exemption as a record-keeping concession.** Section 245(1)(b)
  survives it in full.
- **Keeping only what the auditor asked for.** The auditor's request list is a sample.
  Section 245 requires records that explain every transaction, not the ones tested.
- **Discarding the workings behind estimates.** Impairment models, provision
  calculations and valuation reports are part of what sufficiently explains the
  financial position.
- **Assuming the Act overrides the accounting standards.** Section 244(7) says the
  opposite — where an approved accounting standard conflicts with the Act in its
  application to financial statements, the standard prevails.

## What's next

Two follow-on questions come up constantly. If your accounting system or shared
service centre sits outside Malaysia, section 245(5) to (7) sets conditions that most
multinational subsidiaries are quietly breaching. And if you are issuing e-Invoices,
a validated document in MyInvois is not automatically a sufficient section 245 record
— three retention regimes now run in parallel and they do not agree on the clock.

## Sources

- Companies Act 2016 (Act 777), reprint as at 1 August 2022 — https://www.ssm.com.my/Pages/Legal_Framework/Document/Companies%20Act%202016_Akta%20777_BI%20(1.8.2022).pdf (SSM)
- Income Tax Act 1967 (Act 53), reprint as at 21 May 2024 — https://www.hasil.gov.my/wp-content/uploads/20240521-akta-cukai-pendapatan-1967-akta-53.pdf (LHDN)
- Practice Directive 10/2024 — Qualifying Criteria for Audit Exemption for Certain Categories of Private Companies — https://www.ssm.com.my/Pages/Legal_Framework/Document/PD10-2024-Qualifying-Criteria-for-Audit-Exemption-for-Certain-Categories-of-Private-Companies.pdf (SSM)

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