General ledger: what it means for UAE businesses.

What general ledger means

Also called: GL, Nominal ledger.

The general ledger is the complete set of a business's accounts in one place. Every sale, purchase, salary, loan and VAT amount ends up posted to it, each entry recorded twice under double entry so that total debits always equal total credits. Sub-ledgers for customers, suppliers and fixed assets feed into it in summary.

In the UAE the ledger is not optional. The Tax Procedures Law requires anyone doing business to keep accounting records and commercial books, and its Executive Regulation says these include records of payments and receipts, purchases and sales, revenue and expenditure, backed by the invoices and contracts behind each entry. The Corporate Tax Law then builds Taxable Income from the accounting income in financial statements, and those statements are drawn from the ledger.

For an SME, the ledger is what the Federal Tax Authority (FTA) asks for first in an audit, often as a listing inside the FTA Audit File. A ledger that is complete, in AED and tied to source documents makes VAT returns, Corporate Tax returns and audits far easier. Failing to keep the required records carries an administrative penalty of AED 10,000 per violation.

How it works

• Each transaction is posted to at least two accounts, with debits equal to credits, so the ledger always balances.
• Amounts are recorded in AED. Foreign currency amounts are converted at the Central Bank of the UAE exchange rate for Corporate Tax (Corporate Tax Law, Article 43) and for tax invoices (VAT Law, Article 69).
• Separate accounts for output tax and recoverable input tax let the ledger support the Tax Record that VAT Law Article 78 requires.
• The FTA's requirements for tax accounting software expect the system to produce an FTA Audit File, which includes supply, purchase and general ledger listings.
• Ledger balances form the financial statements, prepared under IFRS or IFRS for SMEs, that are adjusted to reach Taxable Income under Corporate Tax Law Article 20.
• Corporate Tax records must be kept for seven years after the end of the tax period they relate to (Corporate Tax Law, Article 56).

Worked example

A building materials trader in Dubai sells goods on credit to a registered contractor for AED 40,000 plus 5% VAT. The entry posted to the general ledger is shown below.

Debit: accounts receivable (contractor)	AED 42,000
Credit: sales	AED 40,000
Credit: VAT output tax	AED 2,000
Total debits	AED 42,000
Total credits	AED 42,000

Posting the VAT to its own account, rather than inside sales, keeps both the income figure and the VAT return correct from the start.

Common mistakes

• Posting VAT-inclusive totals to sales or expense accounts, which overstates income or cost and leaves the VAT accounts unreconciled.
• Parking unexplained items in a suspense or miscellaneous account and never clearing them before the books are closed.
• Editing or deleting posted entries instead of correcting them with a dated reversing entry, which breaks the audit trail.

The law

• Federal Decree-Law No. 28 of 2022 on Tax Procedures, as amended, Article 4 (Record Keeping)
• Cabinet Decision No. 74 of 2023, Executive Regulation of the Tax Procedures Law, Article 2 (Keeping Records)
• Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, as amended, Article 20 (General Rules for Determining Taxable Income), Article 43 (Currency) and Article 56 (Record Keeping)
• Cabinet Decision No. 40 of 2017 on Administrative Penalties, as amended, Table No. 1, item 1 (failure to keep required records)

Frequently asked questions

Can a small business keep its general ledger in a spreadsheet?

The law sets what records must be kept, not which software holds them. A spreadsheet can work for a very small business, but it must be complete, in AED, backed by source documents and able to produce readable copies for the FTA when asked. Accounting software makes the FTA Audit File and audit trail much easier to produce.

How long must the general ledger be kept?

For Corporate Tax, seven years after the end of the tax period it relates to. The Tax Procedures rules set a general five year period, with longer periods in some cases, so most businesses work to the seven year Corporate Tax rule. See the record retention entry for the detail.

Related terms

Chart of accounts · Trial balance · Audit trail · Record retention · Bank reconciliation. See every term in the UAE tax glossary.

For the full picture, read our guide: How to Choose Accounting Software for a UAE SME.

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