Cash or accrual accounting: what is the difference?

Under cash accounting, income and expenses are recorded when money is received or paid. Under accrual accounting, they are recorded when they are earned or incurred, regardless of when cash moves.

Why it matters

Accrual accounting gives a truer picture of profit, because it matches income with the costs of earning it. IFRS financial statements use accrual accounting.

In the UAE

For Corporate Tax, businesses with revenue of AED 3 million or less may prepare accounts on a cash basis, while larger businesses use accrual accounting under IFRS. VAT has its own rules on when tax is due, generally based on the date of supply. We keep your books on the basis that suits your business and obligations.