How to value gold stock for accounting in the UAE: weight, cost and the reverse charge

Gold stock should be counted in grams of fine gold, not just pieces. A 20-gram 22-carat bangle contains about 18.33 grams of pure gold (20 × 22/24). Record gross weight, karat and fine weight for every item or lot, along with stone weight where relevant. The value then follows from the fine weight and the cost you paid.

Our view: a gold business whose stock ledger cannot be reconciled to a weighed physical count each month does not really know its profit. Weight is the control that catches theft, wastage and booking errors; dirham value alone does not.

Under IAS 2, which most UAE companies follow, inventory is measured at the lower of cost and net realisable value, using a cost formula such as weighted average. For gold, weighted average cost per fine gram works well: each purchase updates the average, and each sale relieves stock at that average.

IAS 2 also allows commodity broker-traders to measure inventory at fair value less costs to sell, with changes in profit or loss. A bullion dealer that buys and sells mainly to profit from price movements may fall into that category; a jewellery retailer usually does not. Which applies is an accounting judgement your auditor should agree with.

Opening stock: 2,000 fine grams at an average of AED 300 per gram, total AED 600,000. The trader buys 500 fine grams at AED 320 (AED 160,000). New average: AED 760,000 ÷ 2,500 = AED 304 per gram.

A sale of jewellery containing 150 fine grams relieves stock of AED 45,600 (150 × 304). The selling price includes the gold value at the day’s rate plus a making charge, say AED 49,500 + AED 6,000 making = AED 55,500 before VAT. Gross margin on the sale: AED 9,900. Making charges should sit in their own revenue line so you can see how much of your margin comes from craftsmanship and how much from metal.

• Record gross weight, karat, fine weight and stone weight per lot
• Update average cost per fine gram on each purchase
• Separate metal value and making charge on sales
• At period end, compare cost with net realisable value at the closing rate

Investment precious metals can be zero-rated under Article 36 of the VAT Executive Regulation where conditions are met, including a purity of 99% or more. Jewellery sold to consumers is standard-rated at 5%, usually on the whole price including making charges.

Between VAT registrants, Cabinet Decision No. 127 of 2024 applies a reverse charge to supplies of gold, silver, palladium, platinum, specified precious stones, and jewellery where those materials are worth more than the other components, when the buyer intends to resell or use them in manufacturing. The buyer must give the seller written declarations of that purpose and of its VAT registration before the supply, and the seller must keep them and verify the registration. Without the purpose declaration, the reverse charge does not apply. The decision replaced Cabinet Decision No. 25 of 2018.

HelloBooks supports lot and batch tracking and multiple warehouses on its Business plan, so each lot can carry its weight and karat details, and showroom and vault stock can be held separately. Per-line VAT treatment lets one invoice carry a zero-rated bullion line and a reverse-charge line where they apply.

The AI agent reads supplier invoices in Arabic or English, picks out weights and karat, and proposes the lot record. It flags a sale to a registered trader where no purpose declaration is attached, so the reverse charge is not applied without the paperwork. A person still weighs the stock and approves the month-end valuation. Gold businesses that need a custom stock report by karat can ask for one by booking a call at /book-a-demo.