Fixed Assets and Depreciation for UAE Small Businesses
What counts as a fixed asset, how to depreciate it, and the journal entries involved, with a worked example.
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Vehicles, equipment, furniture, computers and shop fit-out last for years, so you record them as fixed assets and spread their cost over their useful life. That spreading is depreciation.
What counts as a fixed asset
An item you expect to use for more than a year and that is worth more than your own capitalisation limit. Set a policy, for example anything over AED 2,000, and apply it consistently. Smaller items are expensed.
Two common methods
Straight-line: (cost − salvage value) ÷ useful life. Same charge every year.
Reducing balance: a fixed percentage of the remaining book value, so the charge falls over time.
Worked example
A delivery van costs AED 60,000, has a salvage value of AED 10,000 and a useful life of 5 years.
- Straight-line: (60,000 − 10,000) ÷ 5 = AED 10,000 a year
- Net book value after year 2 = 60,000 − 20,000 = AED 40,000
Check your own numbers in the depreciation calculator.
The journal entry
Each year: debit Depreciation expense, credit Accumulated depreciation. The expense reduces profit; the accumulated balance reduces the asset to its net book value on the balance sheet.
Why it matters
Depreciation affects your Profit & Loss and, through it, the starting point for Corporate Tax. Keep a fixed-asset register with purchase date, cost, life and method.
Disposals
When you sell an asset, remove its cost and accumulated depreciation and record any gain or loss on disposal.
Do it in your books
Pyalm Books supports manual and recurring journals so depreciation can be posted on schedule. It is free during beta. Start free.
Rules and deadlines change. Confirm the current position with the Federal Tax Authority (tax.gov.ae) or a qualified adviser before you file or pay.