The importance of maintaining proper accounting records in the UAE

Accounting and bookkeeping are extremely important and mandatory for all the businesses in UAE, irrespective of the size of the company. As per the applicable commercial companies law and Tax Procedures law in the UAE, it is mandatory for all the businesses in UAE to maintain the books of accounts in proper and standard way. All the financial transactions of the company must be recorded and maintained properly in a systematic and comprehensive method. 

As per the Federal Law No 32 of 2021 on Commercial Companies, UAE VAT law, and the free zone laws of the UAE, the firms have been directed to maintain proper books of accounts for at least the last five years of the business. The maintenance of the proper books of accounts is mandatory for the businesses in the UAE, and any violation of this rule can attract penalties for the offenders.

The businesses need to hire the professional and qualified accountants to help them maintain their account books that are created in the in accordance with the accounting rules that qualify the International Financial Reporting Standards (IFRS). The businesses who do not hire the accountants for this job, usually outsource their account keeping to the accounting and bookkeeping firms in UAE. This way, they get their work done and also save on the extra money that they would have to spend had they hired an accountant.

The records of the accounts that are maintained by the companies in UAE are not only helpful for the government but also guides the management to understand the fluctuations that have occurred in the business following the different set of protocols and strategies for the business in the previous years.

In Dubai, the firms have to maintain the accounting records that demonstrate the transactions occurring in the business to precisely show the financial situation of the firm at any required time. The records should allow the accomplices or investors to affirm that the records of the organization are appropriately kept as per the arrangements of the Law.

As per Articles for accounting records in the UAE Federal law 32 of 2021, 

• The firms ought to keep up their books of accounts for minimum of five years from the conclusion of the financial year of the company. These records shall be maintained at the head office of the organizations.
• The firms can also maintain an electronic duplicate of the archives of the account records of the business that comply with the rules and the regulations set by the ministerial decision.
• During the preparation of the periodical as well as the annual account reports, the firms must ensure that the records are made in accordance to the International Accounting Standards and must comply with the commonly followed accounting practices to provide an accurate and precise proof about the profit and loss status of the company.

The responsibility for the maintenance of the books of accounts is given to the manager of the company.
The article 87 of the UAE Federal Law No 32 of 2021 on Commercial Companies state that a report on the annual budget and the profit and the loss statement of the business has to be prepared by the manager of the firm. The manager also has to compile an annual report regarding the financial status of the company and also needs to provide a set of suggestions on the appropriations of the benefits of the General Assembly, within a span of 3 months from the conclusion of the monetary year.

According to the Cabinet Decision 36 of 2017 on the Executive Register of Federal Law No (7) of 2017 on
Tax procedures, the organizations are required to maintain the accounting and the commercial book
records of the business. The bookkeeping records and the accounts must comprise of the following
financial scripts and records:

• Balance Sheet
• Profit and loss record statements
• Wages and salaries records
• Fixed asset reports
• Records of the inventory statements at the conclusion of the relevant tax periods

In case, an individual running a business fails to provide the essential accounting records, a penalty of AED 10,000 will be imposed for the first time. If the person is found to violate the Law for the next time, a fine of AED 50,000 will be levied according to the Tax procedures law and the tax law combined.

Further, the Cabinet Decision 36 of 2017 on the Executive Register of Federal Law No (7) of 2017 on Tax systems declares that all the taxable individuals in the country have to maintain a record of their accounts for at least the last five years from the end of the tax period. As for the companies that function in the real estate sector, they must maintain the records of their accounts and other financial statements for the fifteen years from the end of the tax period.

All the free zones in the Dubai directs the registered enterprises to maintain their books of accounts and records as per the local and the required international standards and regulations. Nevertheless, the larger free zones have commanded the enterprises to conduct proper audits for their accounts to provide the records whenever asked for.

In addition, accounting is the crucial process by which the business records, organizes and understands its financial information. With the help of accounting and bookkeeping, you can understand whether your company is making a profit or loss; cash flow; the current value of assets and liabilities; and the areas where your business makes money. In short, accounting matters to you because it tells you whether your business is winning or losing. There are several reasons to maintaining a proper accounts, for instance:

1. Accounting helps you for strategic planning and financial decisions for your business growth.
2. Proper accounting helps demonstrate the health of your business performance which can attract new investors or sell your business.
3. Accounting helps you to have a clear insight into your business cash flow, by tracking your receivables and payables, so you can arrange to avoid any lack of cash.
4. Accounting helps you for tax compliance. Although UAE is a tax-free country, except that you have to pay VAT at a standard rate of just 5%. As per the VAT Law, you have to keep the books of accounts and other financial records, businesses are obligated to demonstrate at all time the compliance to VAT law whether you are registered for VAT or not.

Why Outsourcing could be a good solution:

Business owners need to perform a number of tasks like providing service / selling products, run the business back end, scheduling, and so much more. It’s no surprise it is hard to keep up with accounting tasks. Hiring an employee may not even be feasible, as you may only need bookkeeping services in Dubai, UAE a few hours a month. Then there’s another scenario, you might need full-time help, but realize the costs of having employees is a burden.

• Saves Time
  Handing over the work of Accounting & Bookkeeping in Dubai, UAE to a qualified professional allows the businesses to save their precious time and they can focus on the key area of business.
• Cost Effective
  By hiring qualified professional, who works part time basis, the business can save money on a full time employee. In addition to this the Accountants in Dubai are supervised by an Accounts Manager. The monthly Management Reports are prepared by another Accounting professionals after the initial reviewing. Hence the total expenses are very less for the customer.
• Allows to focus on Core Strengths
  Outsourcing bookkeeping in Dubai helps one to hire an accountant who can handle the day-to-day accounting, allowing businesses to stay purely focused on core strengths which help in growth of the business.
• Professionals Services
  When Bookkeeping services in Abu Dhabi, UAE are outsourced, the Client is getting the service from qualified and experienced professionals in the field of accounting. The Accountant is well versed with the accounting standards as well as in any complicated accounting entries. Hence the client gets quality and timely completion of the work.
• Tax and Audit Ready Financial Statements
  Outsourced professional bookkeeping services to prepare financial records removes concern over whether the books are accurate or questioning the integrity of the financial data. Businesses needs to provide financial statements to the bank, satisfy investor reviews or share information with the auditors, outsourced bookkeeping services help make sure there is no doubt about the data.
• Scalability
  Growing businesses often start out with small requirements but rapidly grow into number of bookkeeping services. Hiring an outsourced bookkeeping service with oversights and a full service offering enables the service to scale to needs, without having to hire or train additional staff.

Whether a business needs financial figures to present to a banker or it just needs to keep a close eye on
cash flow, keeping up to date on accounting tasks is essential. An easy option is to outsource bookkeeping services in Dubai to a professional.