For new Malaysian business owners, deciding between single or double entry bookkeeping greatly depends on your business structure.
If you’ve incorporated an Sdn Bhd, consider that SSM requires all companies to maintain up to seven years of accurate financial records.
Meanwhile, Sole Proprietors have a lot more leeway, and it’s mostly based on the size of your team and complexity of financial transactions.
This post equips you with just enough knowledge to make an informed decision.
Overview of the two methods
We’ll admit that double-entry bookkeeping is our personal recommendation, but we’d rather share the pros and cons of each and let you decide for yourself.
Single entry bookkeeping
The simpler method of recording financial transaction where each transaction is recorded as either debit or credit in a single line entry and in a single account.
- easier to understand for those without accounting background
- less time and resources to record transactions
- less accuracy causes increased risk of errors or fraud
- less comprehensive insight into company’s overall financial health
- does not facilitate the preparation of financial statements
Double entry bookkeeping records each transaction twice – once as a debit and once as a credit.
- more comprehensive financial recording
- facilitates the preparation of accurate financial statements
- better at preventing financial fraud and errors
- easily track cash flow, expenses, revenues, and assets
- more complex and time-consuming
- slightly more time-consuming than single-entry bookkeeping
- usually requires a bookkeeper or accountant unless owner has an accounting background
In our opinion, single entry bookkeeping is suitable for some Sole Proprietorships, especially where the owner personally manages accounting. Sole Proprietorships are subject to minimal reporting requirements and usually have fewer transactions, smaller teams, and simpler business models.
Meanwhile, double-entry bookkeeping should be the standard for any Sdn Bhd regardless of size due to the stricter record-keeping requirements from SSM, including an annual submission of audited financial statements.
An external auditor will review your company accounts, and good luck to any business owner who’s only been recording transactions once!
Of course, despite its many benefits, double-entry bookkeeping can be intimidating and time-consuming to those without an accounting background, which we address in the following section.
Make proper bookkeeping effortless
Regardless of bookkeeping method, we’d like to recommend two things that remove the burden of accounting from the shoulders of business owners.
1. Subscribe to an accounting software
Any modern-day accounting software can automate double-entry bookkeeping, and they’re not even that expensive compared to the value they provide.
Instead of manually calculating entries across accounts, the software does it instantaneously.
Additionally, accounting software comes with:
- Bank account integrations for automated payments and reconciliation
- Financial report generation
- Real time company financial overview, and
- Invoice generation and sending
We feel comfortable saying that a reliable accounting software is an indispensable tool for all but the smallest of businesses.
2. Outsource your accounting
Even with the best accounting software in the world, you should still consider hiring an accountant for several unique benefits that no computer program can provide:
- Certified accountants can optimise your tax strategies based on Malaysian tax law.
- Seasoned accountants can help interpret financial reports.
- As your business grows, an accountant can ensure team members adhere to reporting requirements
Because professionals don’t come cheap, consider outsourcing accounting to SME-friendly firms and give your business the benefit of high talent at budget-friendly rates.
And what a coincidence – MISHU happens to offer SME-friendly accounting services!
Let MISHU handle your accounting
MISHU’s certified accountants are here to assist you with professional services at affordable prices. Our plans cater to organisations of every size – talk to us to find your perfect fit.