Definition

Cash Accounting is a bookkeeping method where income and expenses are recorded only when cash is received or paid. Certain small UAE businesses may use it for VAT under specific FTA conditions.

Key points

• Simplifies cash flow management for small businesses.
• Not suitable for corporate tax reporting (requires accrual).
• Can only be used if FTA approval is granted.

Practical example

A freelancer registered for VAT chooses cash accounting, reporting VAT only when clients pay invoices.

Why it matters

Helps small businesses manage liquidity while remaining VAT compliant.