Amidst the current economic slowdown, companies are understandably looking for ways to cutdown on overheads and maintain revenues. Non-core functions such as marketing, HR, or even accounting may be the first to be foregone.  

This article aims to highlight the importance of the accounting function in a company especially in times of crises. In fact, it is in times of economic uncertainty is when the benefits of maintaining accurate accounts pays dividends.  

Know Where to Focus Your Efforts 

Maintaining accurate books of accounts can help companies identify and separate the profit generating functions from loss generating functions. This is never more important than in the times of economic slowdown. This is the type of information that decision makers need to make choices that can ensure the survival of the company. 

Time for a Loan? 

Governments across the world have implemented financial aid packages for companies to get through the current crisis. Some of these packages include loans for companies to ensure that they have sufficient working capital during these difficult times. In order to be able to get such loans however, companies will be required to submit financial statements explaining their financial position and the impact that the COVID-19 Pandemic had on their operations. In such situations, time is of the essence, therefore, preparing such statements at the spur of the moment would take too long. 

The Tax Man Still Wants His Money 

It is necessary for all companies to comply with the tax regulations that are imposed by the government regardless of the economic conditions. If the company’s accounts are not reliable and up to date, tax calculations will inevitably be affected and accordingly, companies might find themselves either paying more or less than what they should putting themselves at risk of penalties either way. Therefore, maintaining accounting records that are in line with the tax regulations can save companies money and protect them from potential penalties.  

Insurance Claims 

Accounting records may be essential for companies to prove ‘lost earnings’ due to the mandatory closure of the businesses or a drastic decrease in business activity. For companies insured against such natural disasters or circumstances such as the current COVID-19 pandemic, it would be wise to maintain accurate and up to date accounting records to support their insurance claims.  

Life After VAT: Now that you are registered, what next?

Life After VAT: Now that you are registered, what next?

vat bahrain

vat bahrain

Well, first of all, congratulations on successfully registering your business for VAT. For most establishments, it might have been a difficult and complicated task especially if your accounting books were not in order ahead of time.

Now that you are registered though, business cannot continue as usual. Being a VAT registered company/establishment essentially means that you are now responsible for handling funds that essentially belong to the government. You are given a great responsibility and are required to rise up to the challenge in order for you to be able to continue doing business in Bahrain – and avoid the hefty penalties.

First things first though, you need to make sure that you are issuing your invoices properly. By that I mean you are issuing your invoices on time and in the proper format while accounting for VAT appropriately. Articles 52 and 53 of the VAT Regulations specify the requirements of “VAT Invoices”. There are essentially two kinds of invoices, the Standard VAT Invoice and the Simplified VAT Invoice. The latter can only be issued in case the product or service has been delivered to a non-registered person or in case the total value of the invoice is less than 500 BD. I encourage you to download the VAT Regulations here and review the requirements yourself. This may mean that you will need to upgrade or even change your accounting or POS systems since not all systems can comply with these requirements. Moreover, some systems can only accommodate for 2 decimal places in the currency which may cause a problem since Article 55 of the VAT Regulations states that VAT calculations must be rounded to the nearest Fils, which is in the 3rd decimal place. In case you need someone to help you assess your systems, look no further than H.A. Consultancies. As far as I know, they are the experts on such matters.

On the other hand, you will need to make sure that your suppliers also give you correct VAT invoices since you will be claiming back whatever VAT you paid them in your quarterly or monthly return. If their invoices are incorrect or not compliant with the requirements of the VAT Regulations, you might find yourself unable to claim back the VAT you paid.

As for issuing the invoices on time, well, that is a bit easier. You have 15 days from the date of performing the service or delivering the product to issue the invoice. However, VAT may be due prior to the date of your invoice since according to the regulations, it is due on the sooner of performing the service or delivering the product, receiving the payment, or issuing the invoice. Therefore, in case you received an advance payment, VAT will be due on that portion of the advance even if you did not deliver the product or service yet. Moreover, VAT is due even if you did not receive a payment from your customer. Therefore, it would be smart to take advantage of the 15-day leeway in case you have delivered a service/product towards the end of a reporting period.

All of this might be overwhelming at first and you might need to get some guidance from a professional accountant (call us in case you need any help). However, once you get your procedures in order, complying with the VAT requirements can induce more stringent control over your business resulting in a maximization of profits and a reduction of losses.


Munther Al-Arayedh, CPA
Managing Director
Capital Profits Accounting Services

Flavors of Accounting

Flavors of Accounting

types of accounting

types of accounting

Just like ice cream, accounting comes in various flavors. There are so many to choose from, sometimes it is difficult to make up your mind.

In reality though, most of these “flavors” are just plain old vanilla, strawberry, or chocolate. Some are a mix of more than one flavor. Others are more like frozen yoghurt (not real ice cream).

Here we will try to shed light on the main accounting types that may have caused some confusion amongst those non-lingo-savvy business owners out there.

Each of these types has a different focus area and different yet intertwined objectives. The main objective of all accounting services is the same though, to provide decision makers with clarity and control over their business operations at all times.

Tax Accounting

Many would agree, Tax Accounting is bittersweet. It deals with taxes such as Income Taxes, Sales Taxes, Value Added Taxes (VAT), Withholding Taxes, and so on.  The objective is to ensure compliance with the applicable tax laws and local regulations to avoid any fines or penalties that may be imposed due to non-compliance. If done properly, Tax Accounting can save the company money. For instance, proper implementation of VAT regulations can save companies from bearing the cost of input tax and hence reduce the VAT liability on the company.

Cost Accounting

Cost Accounting is plain old vanilla. It simply records all the direct and indirect costs that the company endures in order to keep track of all the money leaving the company or those who we owe money. Once we know where all the money goes (or is supposed to go), reports can be generated to help management take better decisions.

Project Accounting

Project Accounting allows companies to track revenues generated and expenses paid and/or accrued for each project undertaken by the company. The objective is obviously to track profitability of each project individually.

Financial Accounting

Financial Accounting is a mix of multiple accounting disciplines. The objective is to simply generate the three main financial statements, the Balance Sheet, Income Statement, and Cash Flow Statement. This can be easier said than done. Financial Accounting is governed by complex standards which are frequently updated to ensure more accurate reporting. Depending on where your business is located, and, in case you have branches, where those branches are located, you might find yourself preparing different sets of financial statements with subtle differences due to the different financial accounting standard being followed. For instance, the USA has its Generally Accepted Accounting Principles (GAAP) while Europe and most of the Middle East follow the International Financial Reporting Standard.

Management Accounting

Management Accounting is the “make it yourself” flavor of accounting. You can pick and choose what to put in it according to your independent needs. The objective here is to identify, measure, analyze, interpret, and communicate financial information to managers, all in order to be able to get accurate decision making. In this type of accounting, you can identify profitable products and services, generate pricing or marketing strategies, detect inefficient processes and improvement opportunities.

Needless to say, this type of accounting can provide significant insight on a company’s performance, however, sadly, it is typically either not performed in a timely manner, drains resources, or simply overlooked.

Public Accounting

When a firm provides accounting services to other companies, it is called a Public Accounting firm – an example of which is our firm, Capital Profits (surprise!). Public Accounting may include financial audits and reviews, outsourced bookkeeping services, financial statement preparation, internal control policies implementation, physical asset and stock counts, analytical reports, tax return preparation, and accounting consultations.

Nowadays, keeping a company’s accounting books in an orderly manner and following all the regulations enforced by the state can be a stressful endeavor for any business. The risks of penalties and fines are high and hiring an accounting team might be unfeasible. Therefore, having a Certified Public Accountant by your side on a retainer basis can help alleviate concerns with regards to non-compliance and allow business owners to do what they do best, run their business.

Revenue vs. Profit


Rev vs Pro

Rev vs Pro


Any business owner needs to know how to maximize their profit and to demonstrate to investors that the company is heading in the right path since revenue can indicate a firm’s potential.
The most important difference between revenue and profit is that while any company can increase its revenue, it may well be registering a net loss of earrings at the same time.


Revenue means the total amount of money that the company generated through its business activities (in other words, it is the total sales of the company).


1. Gross profit
It is basically revenue minus cost of goods sold, on the income statement, gross profit appears directly after revenue, it is calculated by subtracting Cost of Goods Sold (COGS) from the total revenue.
As a metric, it is used by business owners to gain an idea of how much money they have with which to fund the business after their core product is produced and sold.

2. Operating Profit
Operating Profit means Gross Profit minus all fixed expenses encountered when you run the business, such as rents, utility bills & payroll. It is used to demonstrate the earning power of any business in terms of its regular operations, removing external factors to show its potential profitability.
Some companies may choose to use Operating Profit over Net Profit to highlight the financial impact of external overheads. For example, investors can use Operating Profit to compare the business with a similar firm operating under a different tax structure.

3. Net Profit
Whenever people start to talk about any firm’s profit, they usually refer to Net Profit which means the remaining income after all the operating costs, debts, expenses, interest and taxes are deducted.
Net Profit is the most important financial metric on the income statement, it is the most important figure to the investors and shareholders.
In terms of Operating Profit, Net Profit can be expressed as Operating Profit minus interest and taxes:
Net Profit = Operating Profit – Interest – Tax

4. Net profit margin
The Net Profit Margin is the ratio of the company’s net income to its revenue, it is presented as a percentage.

Taking all of this into account, a business owner should always try to maximize his Gross, Net, and Operating Profits rather than just increasing sales revenue. Nevertheless, if operating expenses are kept under control, increasing sales revenue might well result in an increase in profits.