What Counts as an Accounting Record Under Section 245

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.