UAE Accounting & Tax Terms Glossary

Accounting Period

The time frame (monthly, quarterly, or yearly) for recording financial transactions and preparing reports. Determines VAT, corporate tax, and audit timelines. Accurate periods ensure proper compliance and timely filings with the FTA.

Accrual Accounting

Accounting method recognizing income and expenses when earned or incurred, not when cash is received or paid. Ensures compliance with UAE corporate and tax reporting standards.

Accounts Payable (AP)

Money owed by a business to suppliers for goods or services received. Proper AP management ensures accurate VAT input claims and financial reporting.

Accounts Receivable (AR)

Money due from customers for goods or services delivered. Accurate AR tracking ensures correct output VAT reporting and cash flow management.

Asset

Economic resource controlled by a business, such as cash, inventory, or property. Proper accounting affects tax depreciation, corporate tax, and VAT treatment.

Audit

Formal examination of financial statements, tax returns, and records by auditors or the FTA to ensure compliance and accuracy.

Balance Sheet

Financial statement showing assets, liabilities, and equity at a specific date. Used for corporate tax filings and compliance reporting.

Bank Reconciliation

Matching company financial records with bank statements to ensure accuracy and detect discrepancies affecting VAT or corporate tax reporting.

Bookkeeping

Recording all financial transactions in a structured system. Accurate bookkeeping is essential for tax compliance and audits.

Capital

Funds invested by owners or shareholders into the business. Impacts corporate tax calculations and reporting.

Cash Accounting

Accounting method recognizing income and expenses when cash is received or paid. May affect VAT and corporate tax reporting.

Chart of Accounts

Organized list of all accounts used by a business for recording transactions. Critical for VAT, corporate tax, and financial reporting.

Corporate Tax (CT)

Tax levied on a business’s net profits under UAE corporate tax law. Requires registration, accurate reporting, and timely payment.

Cost of Goods Sold (COGS)

Direct costs of producing or purchasing goods sold. Impacts corporate tax calculations and financial reporting accuracy.

Credit Note

Document issued to reduce previously invoiced amounts due to returns or discounts. Must reflect VAT adjustments.

Debit Note

Document issued to increase previously invoiced amounts or correct undercharged VAT.

Deferred Tax

Tax liabilities or assets recognized for temporary differences between accounting and tax treatments. Affects corporate tax reporting.

Depreciation

Systematic allocation of an asset’s cost over its useful life. Impacts corporate tax deductions and financial reporting.

Dividend

Distribution of profits to shareholders. Usually not subject to corporate tax in UAE but must comply with accounting regulations.

Double Entry Accounting

System recording every transaction as debit and credit in two accounts. Ensures accuracy for VAT, corporate tax, and audits.

Due Diligence

Thorough review of financial, legal, and tax records for compliance, mergers, or corporate transactions.

Earnings Before Tax (EBT)

Profit calculated before deducting corporate tax. Used to determine taxable income and corporate tax liability.

Electronic Filing

Submitting tax returns, VAT returns, or financial reports electronically to the FTA. Mandatory for compliance.

Expense

Costs incurred to operate a business. Proper categorization ensures accurate VAT recovery and corporate tax deductions.

Financial Statements

Reports summarizing a company’s financial position, including balance sheet, income statement, and cash flow statement. Required for audits and tax filings.

Fixed Asset

Long-term tangible asset like property or machinery. Subject to depreciation and affects corporate tax and VAT treatment.

General Ledger (GL)

Central accounting record tracking all transactions. Supports VAT and corporate tax reporting accuracy.

Gross Profit

Revenue minus COGS. Basis for calculating taxable income and corporate tax liability.

Input VAT

VAT paid on purchases or expenses that can be recovered against output VAT.

Inventory

Goods held for sale. Impacts VAT reporting, cost of sales, and corporate tax.

Invoice

Document detailing goods/services provided, amount, and VAT charged. Essential for VAT compliance.

Journal Entry

Record of a financial transaction in the ledger. Ensures accurate accounting and tax reporting.

Liability

Obligation a business owes to external parties. Includes loans, payables, and tax obligations.

Net Profit

Profit after all expenses, including corporate tax, are deducted. Determines distributions and tax liabilities.

Non-Compliance

Failure to meet accounting or tax obligations, risking penalties, fines, or audits by FTA.

Output VAT

VAT collected on sales, payable to FTA. Correct reporting avoids penalties.

Payroll

Records of employee compensation, benefits, and deductions. VAT may not apply, but corporate tax requires accurate payroll records.

Prepaid Expense

Expense paid in advance but recognized over time. Impacts corporate tax and VAT reporting.

Profit and Loss Statement (P&L)

Shows income, expenses, and profit over a period. Basis for corporate tax calculation.

Purchase Order (PO)

Document authorizing the purchase of goods/services. Supports input VAT claims and audit trails.

Reconciliation

Matching internal accounts with external records for accuracy, essential for VAT and tax reporting.

Refund

Reimbursement of overpaid VAT or tax from FTA after reconciliation.

Revenue

Total income from sales of goods or services. Basis for VAT output and corporate tax calculation.

Sales Tax

General term for indirect taxes; in UAE, VAT is the primary sales tax.

Trial Balance

Report listing all account balances to verify that debits equal credits before preparing financial statements.

Tax Base

Amount on which VAT or corporate tax is calculated. Errors can trigger fines.

Tax Deduction

Allowed reduction of taxable income for specific expenses under corporate tax laws.

Tax Evasion

Illegal attempt to avoid taxes, including falsified records or undeclared income. Heavily penalized.

Tax Liability

Total tax owed to the FTA for VAT or corporate tax.

Taxable Supply

Goods or services subject to VAT at standard or zero rates.

Tax Period

Defined timeframe for which VAT or corporate tax returns are prepared.

Tax Point

Date when a VAT liability arises. Determines reporting period.

Tax Planning

Strategic approach to minimize tax liabilities legally while ensuring compliance.

Tax Refund

Reimbursement of excess VAT or tax paid to FTA.

Tax Return

Form submitted to FTA reporting taxable income, output VAT, or corporate tax liability.

Taxable Person

Business or individual obligated to register for VAT or corporate tax.

Withholding Tax

Tax deducted at source on certain payments to non-residents.

VAT Compliance

Adherence to UAE VAT laws, including registration, filing, payment, and recordkeeping.

VAT Invoice

Invoice meeting FTA requirements with VAT amount and TRN.

VAT Refund Delay

Time lag in receiving input VAT reimbursement due to audits or errors.

VAT Registration

Process to obtain a TRN for VAT collection and reporting.

VAT Return Filing

Submitting VAT returns within deadlines to FTA to report output and input VAT.

Working Capital

Difference between current assets and liabilities. Impacts cash flow and tax payments.

Zero-Rated Supply

Supplies taxed at 0% VAT, allowing input VAT recovery.

Accrued Revenue

Revenue earned but not yet received. Must be recognized for accurate accounting and tax reporting.

Accrued Expense

Expense incurred but not yet paid. Recorded to comply with accrual accounting principles.

Adjusting Entry

Journal entry to correct prior errors or account for accruals/deferred items.

Bad Debt

Receivable unlikely to be collected. May be written off for corporate tax purposes.

Bank Charges

Fees incurred from banking activities. Correct classification ensures proper expense recording and input VAT claims.

Capital Expenditure (CapEx)

Investment in long-term assets. Impacts depreciation and corporate tax reporting.

Cash Flow Statement

Report showing cash inflows and outflows. Supports corporate tax planning and liquidity management.

Chart of Accounts (COA)

Systematic listing of all accounts for recording transactions. Critical for VAT and tax reporting.

Cost Accounting

Analyzing and tracking production costs to aid financial reporting and corporate tax computation.

Credit

Accounting entry increasing liabilities, equity, or revenue. Essential for balanced books.

Current Asset

Assets expected to convert to cash within a year, including accounts receivable and inventory.

Current Liability

Obligations due within a year, such as payables or accrued expenses.

Deferred Revenue

Income received in advance but recognized over time, affecting corporate tax calculations.

Dividend Tax

In UAE, dividends are generally not taxed for corporate recipients but must be accounted for in reporting.

Double Taxation

Situation where the same income is taxed in two jurisdictions. UAE has treaties to avoid this.

Earnings Before Interest and Tax (EBIT)

Profit excluding interest and tax. Used for financial analysis and tax planning.

Equity

Owner’s residual interest in the company after liabilities. Impacts corporate tax and reporting.

Expense Recognition

Recording expenses when incurred, ensuring compliance with accounting standards and corporate tax laws.

Fair Value

Estimated market value of assets or liabilities. Important for financial statements and VAT reporting.

Financial Year

Period for which financial statements and tax returns are prepared, usually 12 months.

Fixed Costs

Costs that do not vary with production, e.g., rent. Impact corporate tax and budgeting.

General Expenses

Operating costs not directly tied to production, such as utilities or office supplies.

Gross Income

Total revenue before deducting expenses. Basis for corporate tax calculations.

Income Statement

Report showing income, expenses, and net profit for a specific period.

Indirect Tax

Taxes levied on goods or services, including VAT.

Intangible Assets

Non-physical assets like trademarks, patents. Subject to amortization and tax treatment.

Internal Controls

Processes to ensure accurate financial reporting, VAT compliance, and prevention of fraud.

Journal

Book recording all financial transactions chronologically. Essential for accurate tax reporting.

Liability Recognition

Acknowledging obligations in accounting records. Impacts corporate tax and financial reporting.

Net Assets

Total assets minus total liabilities. Determines equity and corporate tax considerations.

Non-Current Liability

Obligation due beyond one year, e.g., long-term loans.

Payroll Tax

Taxes related to employee compensation; UAE currently has no federal payroll tax, but proper reporting is needed.

Prepaid VAT

VAT paid in advance but applicable to future periods. Requires proper accounting for input VAT recovery.

Provision

Estimated liability for future expenses. Must be accurately recorded for corporate tax purposes.

Revaluation

Adjusting asset values to reflect current market value, affecting depreciation and corporate tax.

Trial Balance Verification

Checking that total debits equal total credits before preparing financial statements, ensuring accuracy for VAT and tax filings.