According to UAE’s Federal Law No. 2 of 2015 bookkeeping is certainly one of the most vital things to be considered and maintained. In the UAE, Partnership Firms (Joint Liability Company) are required to keep accounting records showing transactions to accurately reveal at any time, the financial position of the company. It is to be confirmed by the partners of the company that the book of accounts are maintained according to the provisions of the law.
Each commercial company must maintain its books of accounting in its head office for a period of at least 5 years from the end of its financial year. It is mandatory to maintain the books of accounts under UAE company law and VAT law. Hence accounts maintenance in Dubai and all other emirates in UAE is compulsory.
Businesses in UAE need to have qualified accountants to maintain their books of accountants in compliance with local laws & regulations and as per International Financial Reporting Standards (IFRS).
Under Federal Law No. (2) of 2015 Commercial Companies (including Joint Liability Company/ Partnership Firms) in the United Arab Emirates (UAE).
Article 26– Accounting Records
- Every company shall keep accounting records showing its transactions to accurately reveal at any time the financial position of the company and enabling the partners or shareholders to confirm that the accounts of the company are properly kept in accordance with the provisions of this Law.
- Every company shall keep its accounting books in its head office for a period of at least 5 (five) years from the end of the financial year of the company.
- The company may keep an electronic copy of the original of the documents and records kept and deposited therein in accordance with the controls issued by a Ministerial Decision.
Article 27– Accounts of the Company
- The company shall prepare annual financial accounts including the balance sheet and the profit and loss account.
- The company shall apply the International Accounting Standards and Practices upon preparing its periodical and annual accounts, to give a clear and accurate view of the profits and losses of the company.
- Every partner or shareholder in any company may, based on a written request presented, obtain a free copy of the last audited accounts and of the last report of its auditor The company shall respond to such request within 10 (ten) days from the date of submittal thereof.
It is mandatory for every taxable person to maintain books of accounts under UAE VAT law. It is to be noted that the authority can also ask for additional documents like purchase day book, general ledger, invoices issued and received, VAT ledger, annual accounts and more.
Maintaining proper books of accounts is compulsory in the UAE and any violations will attract administrative penalties.
Advantage of maintain proper books of accounts for Partnership businesses
- It helps in having complete records of business transaction
- It will supply meaningful information about the financial activities of the business to partners and managers.
- Bookkeeping is essential for proper control and management of business operations.
- Since it is mandatory under the UAE Company Law and VAT law, violation of the rule might land the firm in legal issues.
- Keeping proper books of accounts as per the UAE regulations would ensure accuracy in receipt and payment of cash and other transactions done by the company/Partnership Firms.
- At the time of liquidation of Company or dissolution of Joint Liability Company /Partnership Firms, if books of accounts are properly kept it will help you in avoiding any kind of dispute regarding distribution of assets or payment of liability.
The Cabinet Decision 36 of 2017 on the Executive Register of Federal Law No (7) of 2017, mandates that the companies need to keep the accounting records and books must include:
- Records of payments and receipts, purchases and sales, revenues and expenditures,
- Balance sheet and profit and loss accounts.
- Records of wages and salaries.
- Records of fixed assets.
- Inventory records and statements (including quantities and values) at the end of any relevant Tax Period and all records of stock-counts related to Inventory statements.
According to Federal Law No. 2 of 2015 – Failure to keep Accounting Records A fine of at least AED 50,000 (fifty thousand), but not more than AED 500,000 (five hundred thousand) shall be imposed on the company that fails to keep accounting records for the company to state its deals.
It could be difficult for a firm to Managing accounts, keeping records and maintaining accounting records. This is where management consultants and corporate advisors come into play. We at RVG offer accounting outsourcing, accounts reconciliation services, auditing and more. Since bookkeeping is undoubtedly a point of concern for every business, we would recommend working with our company for instant solutions coming from the best industry practitioners across UAE.