ACCOUNTING & BOOKKEEPING IN UAE
What is Accounting?
The term accounting is way broader, going into the realm of designing the bookkeeping system, establishing controls to form the system is functioning well, and analyzing and verifying the recorded information. Accountants give orders; bookkeepers follow them.
Bookkeeping incorporates the issues in estimating the monetary impacts of financial action. Moreover, accounting includes the capacity of budgetary detailing of qualities and execution measures to the individuals who need the information. Business managers, investors, and lots of others rely on financial reports for information about the performance and condition of the entity.
Importance of Accounting
Accounting is essential for trivial business owners because it helps the owners, managers, investors, and other stakeholders evaluate the business’s financial performance. Bookkeeping gives necessary data regarding cost and income, benefits and misfortune, liabilities and resources for higher psychological procedures, and arranging and controlling systems inside a business.
The principle goal of bookkeeping is to record financial transactions inside the books of records to measure and communicate financial information. Additionally, charge revealing offices expect you to hold books at the very least level that tracks salary and use.
There are three necessary fiscal reports produced by your records.
- The Income Statement furnishes you with data about profit and loss.
- The Balance Sheet gives you a transparent picture of your business’s financial position on a specific date.
- The Cash Flow Statement is a bridge between the profit-and-loss statement and balance sheet and reports the cash generated and spent during a particular period.
It is critical you retain your financial records clean and up to point if you want to keep your business afloat. Here are just some of the explanations why it’s essential for your business, big or small!
- Evaluating the Performance of Business – Your financial records reflect the results of operations still because of the financial position of your small business or corporation. In other words, they assist you in understanding what’s happening together with your business financially. Not only will clean and up-to-date records help you keep track of expenses, profit margin, and possible debt, but it’ll help you compare your current data with the previous accounting records and allocate your budget appropriately.
- Ensures Statutory Compliance – Laws and regulations vary from state to state, but proper accounting systems and processes will facilitate you to ensure statutory compliance when it involves your business. The accounting function will ensure that liabilities such as excise, VAT, income tax, and pension funds, are appropriately addressed.
- Helps to Form Budget and Future Projections – Budgeting and future projections can make or break a business, and your financial records will play an important role when it involves it. Business trends and forecasts are constructed on historical financial data to possess your operations profitable. This financial data is most appropriate when provided by well-structured accounting processes.
- Helps in Filing Financial Statements – Businesses must file their financial statements with the Registrar of Companies. Furthermore, listed entities are required to register them with stock exchanges for direct and indirect tax filing purposes. Accounting plays a critical role in all these scenarios.
Purpose/Objective of Accounting
Accounting is commonly stated as “Language of Business.” It’s a method of communicating financial information to different users for decision making. The key objectives of accounting are:
- RECORDING TRANSACTIONS – The principal role of accounting is to keep up a systematic, accurate, and complete record of a business’s financial transactions. These records are the backbone of the accounting system. Business owners should be ready to retrieve and review the transactions whenever required.
- BUDGETING AND PLANNING – Business owners must plan how they allocate their limited resources, including labor, machinery, equipment, and cash, to accomplish the business’s objectives. A crucial component of business management, budgeting, and planning enable firms to plan by anticipating the requirements and resources. This helps within the coordination of various segments of a company.
- DECISION MAKING – Accounting assists in an exceeding range of decision-making processes and helps owners develop policies to increase business processes’ efficiency. Some samples of decisions supported accounting information include the worth to be charged for products and services, the resources needed to form these products and services, and financing and business opportunities.
- BUSINESS PERFORMANCE – Using the accounting reports, business owners can determine how well a business is performing. The financial statements are a reliable source of measuring the key performance indicators so that business owners can compare themselves against their past performance also as against the competitors.
- FINANCIAL POSITION – The financial statements generated at the end of the accounting cycle reflect the economic condition of a business. It shows the quantity of capital has been invested, how much funds the firm has used, the profit and loss, and the number of assets and liabilities of a company.
- LIQUIDITY – A typical reason for small business failure is that the mismanagement of money. Accounting helps determine the liquidity of a business, which refers to the cash and other liquid resources at your disposal to pay off financial commitments. The info reduces the chance of bankruptcy through the detection of bottlenecks.
- FINANCING – Accounting helps business owners prepare historical financial records yet as financial projections which might be used while applying for a loan or securing investment for the business.
- CONTROL – By placing various checks across the organization, accounting helps avoid losses caused by theft, fraud, errors, damage, obsolescence, and mismanagement. The internal controls safeguard business assets and avoid long-term injuries.
- LEGAL REQUIREMENTS – Law requires businesses to take care of an accurate financial record of their transactions and share the reports with the shareholders, tax authorities, and regulators. The financial statements and info also are required for indirect and direct tax filing purposes.
The Accrual vs. Cash Basis of Accounting
To properly implement bookkeeping, companies must first choose which basis of accounting they’re going to follow. Companies can choose from two basic accounting methods: the cash basis of accounting or the accrual basis of accounting. The difference between these kinds of accounting is predicated when the corporate records a sale (money inflow) or procurement (money outflow) within the books.
|Cash Basis||Accrual Basis|
|Definition||Record transaction only if cash is received or paid||Record transaction when it occurs, whether or not cash is received or paid|
|Example: You procured 100 units of a product and will pay for it next month.||No transaction recorded||Transaction recorded through accounts payable (liability) account|
What is Bookkeeping?
Bookkeeping is an essential subset of accounting. Accountancy refers to accumulating, organizing, storing, and accessing the financial information base of an entity, which is required for two basic purposes:
- Facilitating the day-to-day operations of the entity
- Preparing financial statements, tax returns, and internal reports to managers
Bookkeeping (also called recordkeeping) may be thought of because of the financial information infrastructure of an entity. The financial information base should be complete, accurate, and timely. Every recordkeeping system needs quality control built into it, which is called internal controls.
Bookkeeping involves the recording, on a day to day, of a company’s financial transactions. With legitimate accounting, organizations are prepared to follow all data on its books to shape fundamental working, contributing, and financing choices.
Clerks are people who deal with every money related datum for organizations. Without clerks, organizations wouldn’t bear in see any problems their present money related position, besides the exchanges that happen inside the corporate.
Accurate bookkeeping is additionally crucial to external users, which has investors, financial institutions, or the govt. – With legitimate accounting, organizations are prepared to follow all data on its books to shape basic working, contributing, and financing choices.
Importance of Bookkeeping
Clerks are people who deal with every single budgetary datum for organizations. Without accountants, organizations wouldn’t bear in see any problems their present fiscal position, moreover, the transactions that happen inside the corporate.
Many small companies don’t hire full-time accountants to figure for them due to the cost. Instead, small companies generally employ a bookkeeper or outsource the work to a knowledgeable and professional firm. One important thing to notice here is that several people that will start a new business sometimes overlook the importance of matters like keeping records of each penny spent.
Activities of Bookkeeping
Book-keeping comprises of plenty of functions and activities bundled together. Some such activities are
- Recording all financial transactions
- Posting debit and credits within the respective ledgers
- Producing and organizing all source documents like invoices
- Payroll accounting and maintenance can also be clubbed in with bookkeeping.
Bookkeeping vs. Accounting
|Bookkeeping consists of recording financial transactions in an exceeding logical fashion||Accounting concerns itself with summarizing of such recorded financial transactions|
|It is the basis of the method of accounting||Accounting is that the basis for the Business Language|
|Financial statements aren’t part of the bookkeeping||Preparing financial statements is that the ultimate aim of accounting|
|Managers don’t take decisions based on bookkeeping records||Accounting records are accustomed to assist managers in making decisions|
|Bookkeeping doesn’t have any branches||Accounting has branches like Cost Accounting, Management Accounting, etc.|
|It is done by bookkeepers, who don’t require any special skill or knowledge||Accountants, on the opposite hand, require special accounting knowledge and skills|
Difference Between a Bookkeeper and an Accountant
An accountant is accountable for assessing and interpreting the organization’s financial data and reporting thereon. An accountant possesses a higher skill set than a bookkeeper, whose primary responsibility is handling the actual recording of the company’s financial transactions. An accountant usually encompasses a degree or certification and is paid better than a bookkeeper. Typically, a bookkeeper reports to the accountant.
A bookkeeper doesn’t require any formal training; however, a bookkeeper’s job is vital. The info a bookkeeper is liable for gathering and managing affects how an accountant interprets the corporate financial information. Supported this information, the accountant provides recommendations to management or the company’s owners about spending, tax issues, or other business concerns.
Duties of a Bookkeeper?
The obligations of an accountant differ, contingent upon the corporate. Here is a breakdown of the duties ordinarily identified with an accounting job:
- Suggest, execute, or oversee bookkeeping programming to build up a solitary or twofold section arrangement of bookkeeping.
- Suggest, execute, and screen accounting approaches and methodology.
- Create credit and charge accounts, including the relegating of cost classes.
- Enter costs and pay into the product, including non-advanced techniques for installment like money and checks.
- Handle banking activities, including new deposits.
- Train staff on the utilization of relevant bookkeeping software (such as the way to enter expenses).
- Verify recorded expenses are within the company’s policies and manage approvals.
- Verify the accuracy of data and that the accounts balance (if a Double-Entry bookkeeping system).
- Maintain records, and backup and archive as necessary.
- Assist the accountant in preparing financial statements (or depending on the type of reports required, make them himself).
- Ensure bookkeeping adheres to accounting best practices and government regulations.
- Assist with audits.
- Flag discrepancies.
A bookkeeper also incorporates a duty to keep the information he processes confidential, as he will be privy to sensitive financial information, including payroll salaries.
Duties of an Accountant
The duties of an accountant can be segregated into four areas:
Data Management – Overseeing how data is stored, managed, and updated. For example, a bookkeeper might recommend the software for a double-entry bookkeeping system of accounting, but the accountant would approve it.
Financial Analysis and Consultation – Properly assessing data and advising management.
Financial Reports – having the ability to generate quality standard business reports and statements required by businesses.
Regulatory compliance – Being updated on government regulations and ensuring the corporate is following industry standards.
Why Outsource to Accounting Firms in Dubai?
It’s been mandated within the UAE Commercial Company of 2015 that maintaining proper books of account for a minimum of five years is now a legal requirement. VAT in UAE implemented now. It’s a time of tax returns filling; books of account should also be maintained for five years.
There are many things to be done in an organization, and it’s always challenging to fulfill the legal requirements and keep track of business strategies to be consistently within the race with businesses. With this, the accounting side of an organization is quite challenging to manage. Accounting and bookkeeping services in UAE are being offered by HMAS, as outsourcing could be a significant option for companies.
Outsourcing accounting & bookkeeping services in UAE is a prudent move. It can help organizations significantly, especially once you are outsourcing from an accounting services company that uses the foremost up-to-date accounting software in Dubai.
HMAS offers accounting services in Dubai/UAE that maintain quality accounting and financial records. At HMAS, our accountants provide standardized accounting and bookkeeping services in Dubai, which allows the business to run efficiently and effectively. We follow International Financial Reporting Standard (IFRS) to supply well-maintained accounting and bookkeeping services and accounting solutions to ensure higher sales and growth of the company.
Benefits of Hiring Accounting Firms in Dubai/UAE
HMAS is one of the foremost reliable accounting firms in Dubai. We make sure that all the financial data is in proper format and must meet the criteria of the international standards and therefore, the scope of work to supply the effective accounting services in UAE which constitutes:
- Journal Entries
- Sales & Revenue Posting
- Payments Posting
- Accounting of Petty Cash
- Received Material Posting
- Payroll Accounting
- Depreciation & Fixed Assets
- Accounts Receivable
- Debit & Credit Adjustments
- Balance Sheet
- Cash Flow Statement
- Posting of Journal Entries
- Receipts Posting
- Purchase Invoices Posting
- Posting of Material Issued
- Projects Accounting
- Admin & General Expenses
- Bank Reconciliation
- Accounts Payable Reporting
- Trial Balance Reporting
- Profit and Loss Accounting
- Financial Statements