Why Construction Accounting Demands Special Attention?
Construction accounting is fundamentally different from other industries due to its project-based nature, extended timelines, and complex billing structures.
In Malaysia, contractors face additional challenges with:
This comprehensive 4,000+ word guide offers a detailed, step-by-step breakdown of construction accounting processes, specifically designed for AutoCount users in Malaysia.
Understanding Construction Accounting Frameworks in Malaysia
Welcome to the detailed guide on Construction Accounting Frameworks! This document will explore important principles such as MFRS 15 for revenue recognition and provide insights into retention accounting practices.
1.1 Revenue Recognition: MFRS 15 Deep Dive
MFRS 15 requires construction companies to recognize revenue based on performance obligations rather than cash receipts.
Key Concepts:
- Output Methods: Recognize revenue based on milestones (e.g., completion of foundation, structure)
- Input Methods: Recognize revenue based on costs incurred (% of completion)
Practical Example
A RM1,000,000 project with RM600,000 costs incurred (60% complete):
Revenue to Recognize = Contract Value × % Complete
= RM1,000,000 × 60%
= RM600,000
AutoCount Implementation:
- Create a custom field for “% Completion” in project records
- Set up automated revenue recognition rules
- Generate MFRS 15-compliant reports
1.2 Retention Accounting: Legal & Operational Guide
Retention money serves as quality assurance, typically:
- 5% for private projects
- 10% for government contracts
Type | Account Classification | When to Recognize |
---|---|---|
Client Retention | Current Asset | Upon billing |
Subcontractor Holdback | Current Liability | Upon certification |
Statutory Requirements:
LHDN:Retention is taxable upon billing (not release)
SOCSO:Must be disclosed in financial statements
AutoCount Journal Entries - Detailed Breakdown
2.1 Progress Billing with Retention (Step-by-Step)
Scenario: Bill RM100,000 with 5% retention
Journal Entry:
Account | Type | Debit | Credit | Explanation |
---|---|---|---|---|
Accounts Receivable | Current Asset | 95,000 | Net receivable after retention | |
Retention Receivable | Current Asset | 5,000 | Amount withheld by client | |
Construction Revenue | Income | 100,000 | Total contract value |
AutoCount Configuration:
- Navigate to Settings > Chart of Accounts
- Create “Retention Receivable” (Account Code: 1205) as Current Asset
- In Invoice Template, add retention as a deduction line item
2.2 Receiving Payment (Excluding Retention)
Scenario: Bill RM100,000 with 5% retention
Journal Entry:
Account | Type | Debit | Credit |
---|---|---|---|
Bank Account | Current Asset | 95,000 | |
Accounts Receivable | Current Asset | 95,000 |
Reconciliation Process:
- Match payment to original invoice
- Flag unpaid retention in aging report
2.3 Subcontractor Payments with Retention
Scenario: RM100,000 certified payment with 10% retention
Journal Entry:
Account | Type | Debit | Credit | Notes |
---|---|---|---|---|
Subcontractor Expense | Cost of Sales | 100,000 | Full certified amount | |
Accounts Payable | Current Liability | 90,000 | Net payable | |
Retention Payable | Current Liability | 10,000 | Held back |
AutoCount Workflow:
- Create subcontractor ledger with retention tracking
- Set up auto-reminders for retention release dates
Advanced AutoCount Configuration
3.1 Project Costing Module Setup
- Go to Modules > Job Costing
- Activate “Track by Job” option
Create Cost Categories:
Category | Account Code |
---|---|
Materials | 5001 |
Labor | 5002 |
Equipment | 5003 |
Assign Costs to Projects:
Project: KL Tower (Job Code: J-2024-01)
Cost Type | Amount (RM) | Account Code |
---|---|---|
Materials | 50,000 | 5001 |
Labor | 30,000 | 5002 |
3.2 WIP Reporting Configuration
Navigate to Reports > Custom Reports
Build WIP template with key fields:
E-Invoicing & Compliance in Malaysia
4.1 Overview
Effective from 1 January 2024, the Malaysian government mandates e-invoicing for all registered businesses. AutoCount allows integration via XML / API for seamless submission.
4.2 AutoCount E-Invoice Setup
- Go to Settings > E-Invoice
- Activate e-invoice submission mode
- Upload digital certificate from MOF
4.3 E-Invoice Submission Workflow
- Create invoice as usual in AutoCount
- Validate invoice against MOF XML schema
- Submit via AutoCount API
- Download signed XML receipt for your records
Manage Your Construction Projects with Ease
Don’t let complex accounting entries slow you down. Upgrade to AutoCount and ensure compliance with the latest accounting standards.
Explore AutoCount solutions that make your business run smoothly
Payroll / HRM Solutions
Paying your workers easy! With AutoCount, you can simplify how you give out salaries and employee benefits.
POS System Solutions
Selling things easy! Use our strong cash register system to handle sales quickly. This is super important for stores!
E-Commerce Solutions
Sell things online easily! With AutoCount, you can handle online sales and process orders smoothly using our e-commerce solutions.
Mobile App Business Solutions
Manage your business data on-the-go with AutoCount's mobile solutions. Handle your information conveniently from your phone.
Accounting Solutions
Money tasks easy! Use AutoCount to write down and see how your money is doing, from the start to the reports.
F&B Solutions
Get special help for food and drinks! We have solutions that take care of orders, keeping track of food, and selling things – perfect for restaurants and cafes!
Customized Accounting Software
Make your own special money program! AutoCount can create customized accounting software just for you, addressing exactly what you need.