Cash vs Accrual Accounting in the UAE | Wonso
A blunt look at how generative tech is eating routine finance work, where it still trips today, and how Wonso’s human‑plus‑AI approach lets you double down on your core trade.
Written by
Kari Honkanen
Snapshot
Cash basis records revenue when money hits the bank and expenses when money leaves.
Accrual basis records revenue when earned and expenses when incurred, regardless of cash.
UAE VAT is filed on an accrual basis by default and corporate tax follows accounting profit, so accrual wins for most growing firms.
Wonso on QuickBooks Online automates accrual entries, from deferred revenue to pre‑paid expenses.
Why this choice matters in the Emirates
A Dubai creative studio bills a three‑month retainer in advance. On cash basis that looks like a huge spike in one month and nothing in the next two, confusing investors and inflating tax. Accrual basis spreads the income over the full quarter, matching effort and revenue. With corporate tax now linked to accounting profit, wrong timing can cost real dirhams.
Cash basis – keep it simple
TCash basis feels intuitive: book sales when you get paid and costs when you pay. It keeps the ledger short and bank‑centred.
Wonso shortcut
Ask Wonso "show cash basis P‑and‑L for March" and get a view stripped down to actual inflows and outflows, handy for cash management.
Pros
Easy to understand
Bank balance always matches profit on paper
Cons
Fails when you issue credit invoices or hold inventory
VAT is accrual‑driven, so you must still track invoice dates
Gives investors a distorted growth picture
Accrual basis – the real performance view
Accrual accounting matches income and expenses to the period they relate to. Sell a yearly license, and only one twelfth hits each month.
Wonso shortcut
Wonso spots large one‑off receipts and offers to spread them over future periods automatically.
Pros
Clean monthly profit trend
Aligns with VAT and corporate tax rules
Mandatory when you cross AED 50 million revenue or seek audit
Cons
Slightly more complex
Needs journal entries for deferrals and accruals
Compliance checkpoints
Area | Cash allowed? | Notes |
|---|---|---|
VAT filing | No, accrual by default | Cash VAT scheme possible only with FTA approval for revenue under AED 5 million |
Corporate tax | Technically yes, but rare | Tax follows accounting profit; auditors expect accrual |
Audited statements | No | IFRS is accrual based |
When cash basis might suffice
Freelancers well below VAT threshold
Pure cash sales, no credit terms, no stock
You plan to stay micro for now
If any of those facts change, switch early. Retro‑fitting a year of deferrals is painful.
How to migrate without headaches
Close books to date on cash basis and reconcile every bank account.
Activate accrual in QuickBooks Online. Enable accounts receivable and payable modules.
Connect Wonso. The AI scans past invoices and suggests opening AR and AP balances.
Set up deferral rules. For retainers or subscriptions, Wonso schedules revenue recognition automatically.
Run parallel reports for one month to build confidence.
Straight talk from a founder
Ask ten investors and nine will say they ignore cash‑basis numbers. Accrual is how they compare businesses. With VAT and corporate tax leaning that way too, the choice is clear. Use Wonso on QuickBooks Online to handle the journals and keep your focus on growth, not accounting mechanics.
