Does Wafeq follow the accrual basis or the cash basis?

Wafeq uses the accrual basis of accounting, which is the most widely adopted and recognized accounting method.

What does accrual accounting mean?

It means that revenues and expenses are recorded when they occur, not when the cash is actually received or paid.

• Revenue is recorded when the invoice is issued — even if the payment hasn’t been received yet.

• Expenses are recorded when the supplier's invoice is received — even if it hasn’t been paid yet.

Why is this important?

• Because it’s the officially recognized basis by authorities such as the Zakat, Tax and Customs Authority in Saudi Arabia, the Federal Tax Authority in the UAE, and other tax authorities.

• It ensures that your business complies with proper timing of financial disclosures, based on when transactions happen not when they're paid.

• It is required for filing tax returns such as VAT declarations.

• It is more accurate from an accounting perspective.

What’s the difference between accrual and cash basis? (Practical example)

Let’s say you issue a sales invoice on July 1st for SAR 10,000, and the client pays it later on October 10th.

• If you're using the accrual basis:
  The invoice is recorded on July 1st and included in the Q3 VAT return (July–September), regardless of whether it’s been paid.

• If you're using the cash basis:
  The invoice is only recorded on October 10th, when the payment is received, and is included in the Q4 VAT return (October–December).

Can I exclude unpaid invoices from the VAT return?

No, this is not allowed under tax regulations.
Every sales or purchase invoice must be reported with its actual issue date, even if it hasn’t been paid yet.