Top Guide: Construction Accounting Malaysia with AutoCount – 2025 Compliance Tips & Entries
Construction accounting requires specialized knowledge due to project-based revenue recognition, retention handling, and complex billing structures. AutoCount provides tailored solutions for managing these complexities, including MFRS 15 compliance, retention accounting, subcontractor management, and e-invoicing requirements. Streamline your construction business’s financial management and ensure full compliance with Malaysia’s regulations.
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:
MFRS 15 compliance
for revenue recognition
Retention money handling
(5–10% of contract value)
Subcontractor management
and withholding tax
E-invoicing mandates
(effective 2024)
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:
Contract Value
Costs Incurred
Billed Amount
Over Billing
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
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.
