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Partnership Accounts

Updated: Jul 12, 2022

Keeping the books of a partnership is often done in the same manner as maintaining the books of a sole proprietorship, with the following exceptions:

  • Each partner has its capital and drawings account.

  • When partners are allowed to draw salaries or other benefits, the respective drawings account for each partner is credited, and the profit and loss account takes a similar debit. Adjustments of similar nature are made to the accounts whenever interest is either payable to a partner (on the capital account) or payable by a partner (on the drawings account).

  • At the end of each accounting year, the profit or loss allocated to each partner in line with the partnership agreement is either transferred to that partner's capital account or drawings account, depending on which account is more appropriate.


We have written some articles on partnership accounts that you might find helpful:


Partnerships In Malaysia - Theory
How does a Partnership Operate
Special Accounts for Partnerships
Partnership Formation Accounting
Distribution of Partnership Profits Accounting
Accounting for the Liquidation of a Partnership
Taxation of Partnerships - Capital Allowance

Current applicable laws and regulations do not mandate audits of partnership accounts.


The acceptance of partnership accounts and records is contingent on the Director-General of Inland ("DGIR") Revenue being satisfied that these are maintained in such a way that they enable the determination of partnership income.


On the other hand, should it become necessary to do so, the DGIR possesses the authority to issue directives on the format of these records and how they must be kept.


Utilizing the authority granted to him by Section 82(5) of the Income Tax Act 1967 ("ITA 1967"), he is also able to require the preparation of audited financial statements within a given period.



Duty to keep Records and give Receipts

Under s 82(1) of the ITA 1967, every person carrying on a business—

  1. shall keep and retain in safe custody sufficient records for a period of seven years from the end of the year to which any income from that business relates to enable that income from that business for each year of assessment or the adjusted loss from that business for the basis period for any year of assessment to be readily ascertained by the Director-General or an authorized officer; and

  2. if the gross takings from the business for the basis year for any year of assessment exceeded one hundred and fifty thousand ringgit from the sale of goods or one hundred thousand ringgit from the performance of services, shall issue a printed receipt serially numbered for every sum received in that year of assessment in respect of goods sold or services performed in the course of or in connection with the business and shall retain a duplicate of every receipt so issued.

"Records" include —
  1. books of account recording receipts and payments or income and expenditure;

  2. invoices, vouchers, receipts and such other documents as in the opinion of the Director-General are necessary to verify the entries in any books of account; and

  3. any other records as may be specified by the Director-General under subsection

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