Category

2.2. Income & Expense Recognition

Theory

00:00 What is income and expense accounting;
00:46 When to recognize income in UAE;
02:07 Expense categories & deductibility in UAE;
03:16 Combined recognition & classification practices;
04:13 UAE income & expense essentials.

Practice

00:00 Purchases, Sales & VAT;
00:40 Purchase Transaction;
02:24 Purchase with Transport Costs;
04:34 Creating an Item Card During Purchase;
06:17 Adding a Fixed Asset to Accounting;
07:51 Utility Service Purchase;
09:30 Sales Transaction;
11:11 Service Sale;
12:49 Sales Return;
14:00 Settling Outstanding Customer Balance.

Key Terms & Definitions

Income — Economic benefits earned by a business that increase equity, recognized under IFRS and used as the basis for UAE corporate tax.

Accrual Basis — Income and expenses are recorded when earned or incurred, regardless of cash movement (default under IFRS and UAE CT).

Cash Basis — Income and expenses are recorded only when cash is received or paid; allowed for UAE small businesses with ≤ AED 3 million revenue.

Corporate Tax (CT) — UAE tax calculated based on accounting profit prepared under IFRS or IFRS for SMEs, with specific adjustments.

Deductible Expenses — Business expenses that are wholly and exclusively incurred for business purposes and allowed for CT deduction.

Restricted Expenses — Expenses that are partially deductible, such as entertainment costs (50% limit).

Disallowed Expenses — Costs not deductible for corporate tax, including penalties, fines, unapproved donations, and certain VAT-blocked items.

Entertainment Expenses — Meals, hospitality, or client entertainment costs, only 50% deductible under UAE tax law.

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