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Accounting for SMEs in Dubai in Uncertain Times

Although some claim Dubai is a tax haven or that there are no taxes. True, but few people realize how large the fixed administrative costs are. As a result, keeping an eye on your cash flows and profit and loss accounts is critical, particularly during times of economic uncertainty. You need the correct tools to help your business succeed, and the financial statement is one of them. In a post-pandemic environment, businesses must adhere to the fundamentals of accounting, with financial statements serving as the company’s financial dashboard. As one of Dubai’s leading accounting and bookkeeping businesses, we recommend that you place greater emphasis on financial statements.

Balance sheets, income statements, cash flow statements, and statements of owner’s equity are examples of financial statements that show you where your money is going, where it’s coming from, and how much you have to operate your business. Accurate financial statements are essential for making sensible business decisions and are required if you want to acquire a loan or attract investors.

We’ll walk you through the fundamentals of each financial statement and how to use them to manage your business like a well-oiled machine in this post. Continue reading if you want to learn more about financial statements.

The Statement of Cash Flows

The cash flow statement takes center stage since it gives you a picture of your company’s overall liquidity. The cash flow statement shows you where your money has gone in your company’s activities. Depending on the size of the company, the number of categories contained in the cash flow statement may vary slightly.

Financing activities, investment activities, operating activities, and extra information reported on the statement of cash flow are the categories of statements of cash flow. A cash flow statement’s primary goal is to assist businesses in determining where cash is coming in and going out. It’s crucial information for any company looking to determine whether it’s spending more money than it’s generating.

The Statement of Profit or Loss & Comprehensive Income

The Statement of Profit or Loss and Comprehensive Income details the company’s revenue, as well as the expenses, incurred. In a nutshell, it reveals if your organization has a net loss or profit. The income statement provides a detailed insight into the company’s activities by detailing the company’s direct, indirect, and capital expenses.

The direct expense is combined into the cost of goods sold or the cost of sales, which represents the direct wholesale costs, on an income statement. To calculate the gross profit margin, subtract the cost of sales from the revenue. Indirect expenses, like salaries, general and administrative expenses, research and development, and depreciation, are an important part of the income statement since they represent all of the costs that aren’t directly related to a company’s revenue-generating operations.

The capital expenses are the income statement’s third and final category. Interest, taxes, and unusual goods are examples of these types of expenses. The bottom-line net income, or the overall amount of earnings your company has generated, is calculated by subtracting these items. To guarantee that your company’s revenue statements are properly created, consult with the best accounting firms in Dubai.

The Statement of Owner’s Equity

There is the possibility that the equity of the company owner will alter over time. The statement of owner’s equity is a crucial, yet frequently overlooked, a financial document that discloses information regarding changes in the owner’s capital account over time. It contains information such as:

  • The opening balance of the owner’s capital account
  • Increases to equity from profits or additional capital contributions
  • Decreases to equity from losses or capital distributions
  • The movement in the current accounts of the shareholder like withdrawals or contribution to the working capital
  • The closing balance of the owner’s capital account

The term Owner’s equity is used in legal entities such as a sole proprietorship (Sole Establishment). The preferred word in other corporate arrangements, such as an LLC, is shareholder’s equity. It’s also worth noting that the owner’s equity is not an asset because it’s theoretically both an asset and a liability for the firm owner.

The Balance Sheet

The balance sheet is a snapshot of your company’s current financial situation. It contains information about the assets you own and the liabilities (debts) you owe at any given time. Assets, liabilities, and equity are the three main categories of a traditional balance sheet.

The regularity with which you prepare a balance sheet is determined by the kind of your company. Some businesses will be required to prepare financial statements on a daily or weekly basis, while others would only receive an audited balance sheet once a year. Banks, for example, transfer a lot of money and must compile a balance sheet every day. A tiny shop, on the other hand, might only get a balance sheet every three months.

A balance sheet allows a business owner or manager to determine the company’s most essential ratios, such as solvency vs liquidity, which is especially critical for debt management, current, and liquidity ratios, which show working capital movements. The balance sheet also makes it clear whether the company can pay its debts, distribute dividends, raise capital, or focus on receivables recovery, among other things.

How Can We Help You?

You may produce your financial statements by meticulously gathering data and analyzing the figures. However, as an entrepreneur, you can’t afford to spend every night bent over a calculator or computer. Experienced accounting and bookkeeping organizations in Dubai, such as Alya Auditors, come in handy in this situation.

We can accurately create your financial accounts so you can make informed financial decisions without the hassle of paperwork, and we are registered with all free zones and banks where you must submit audited financial statements every year. Plus, with our guidance, you’ll know your financials are complete and accurate when it’s time to submit your VAT returns. When filing the VAT returns, you must ensure that the sales/turnover as per the VAT return are in line with your books of accounts / financial statements. To begin, contact Alya Auditors for the best accounting and auditing services in Dubai. 

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