ACCOUNTING IN ISLAM
Prepared by:
JURIAH BINTI LATIF
SHARMA BINTI JABIR
AZIZAH BINTI YAHPAR
Q1: Historical development-5th to 12
century
The religion of Islam start in Makkah (610
AD) – Quran to prophet Muhammad.
Muslim civilization start when prophet
Muhammad raised as the final messenger
(622 AD)
Accounting System
1)
Accounting for live stock
2) Construction accounting
3)
Agricultural accounting
4)
Warehouse accounting
Accounting system
5) Currency accounting
6) Sheep Grazing
accounting
7) Treasury
accounting
Accounting Record
Jaridah Jaridah Al-
Kharaj Jaridah
Annafakat
Jeridah Al-Mal
Jaridah Al-Musadareen
Daftar Al-Yawmiah
Daftar Al-Tawjihat
Types of accounting
reports
Al-Khitmah Al-Khitmah Al-Jame’ah
The development of accounting records &
reports in the islamic state have most
likely contributed to the development and
practice of accounting in Itally as
documented by Pacioli in 1494
Q2: Factors behind the development
islamic accounting records & reports in
Muslim civilization
Development
Zakat
Baitulmal, Waqf ,
Diwan2
Geographical expansion
Religously motivated
Q3: The features of accounting practice
Based on syariah/islamic ethics & islamic eco.
-Accountibility to society
-Full disclosure
Support socio-justice
Q4: The world view behind the theory and
practice of conventional accounting.
Theory
Based on ethical value concept
Secularism
Emphasis on reasoning as well as
illumination of rationality
Continued…
Practice
Western world view and form the basis
of accounting system
Relies on ethical value concepts and
rational economic foundation
Focus on rational economic decision
model
Accountability to primary users
Limited disclosure
Support / enhance capitalism
Q5: Difference characteristics of Islamic
accounting information and conventional
accounting
Islamic Conventional
System •Syariah regulations •Conventional regulations
Relevance •Truth, fair and accurate
disclosure of all facts
•Influence economic decision
•Timeliness
Undestandability •Information not to deceive user •Information in understandable
form
Materilaity
Reliability
Faithful
presentation
•Disclosure of all necessary
information
•True and complete, raliable and
financial disclosure for them
•Presented correctly and fully
including details for all the
transaction undertaken
•Information that would have
impact on economic decision
•Verifiability, faithful representation,
substance over form, neutrality,
prudence and completeness
•Must represent fully all
transactions it purports to
represent
Q6. Difference between Conventional and
Islamic financial reporting perspective
ISSUE CONVENTIONAL ISLAMIC
Objectives •Accountability to
stakeholders
•Assist users in their
economic and
investment decision
•Accountability to God
•Accountability to society
•Assist users in their
economic and investment
decision and accomplishing
of their religious
obligations (zakat)
Measurement •Historical cost,
lower of cost and
NRV
•Historical cost
•Current value
ISSUE CONVENTIONAL ISLAMIC
Reports •Balance Sheet
•Income Statement
•Cash Flow Statement
•Environmental
•Social Report
•Balance Sheet
•Income Statement
•Cash Flow Statement
•Environmental
•Social Report
•Value Added Statement
•Current Value B/S
•Statement of sources and
uses of zakat funds
ISSUE CONVENTIONAL ISLAMIC
Disclosure Limited disclosure
•Economic
•Environmental
•Social such as
employee-related,
products, community
development
Full disclosure
•Economic issues
•Environment
•Social issues
-monopoly practices
-interest/riba
-corrupt practice
-non-fulfillment of
contract
-amount of zakat paid
-computation of zakat
-designated company
Q7. Difference of Islamic Accounting in the
context of objectives, measurement and
disclosure and presentation of information. 1. Objectives
-Rizal Yaya & Shahul Hameed (2006)
Decision usefulness
Stewardship
Islamic Accountability
Decision usefulness
-provide information that is useful in making
business and economic decision.
-information about islamic bank’s compliance
with the islamic syariah
-information about financial position and
performance
-cash flow information
-information to assist the concerned party in
determination of zakat
-social and environmental information
Stewardship
-contribute to the safeguarding of the assets,
and to the enhancement of the managerial
and productive capabilities of islamic bank,
encouraging compliance with its established
goal and policies
Islamic Accountability
-premised on both the accouter & the
accountee having dual accountabilities
-arise from concept khilafa; accountable to
Allah on the day of judgment for all resources
under their control, how it is used
-contract between an owner & a manager,
social contract between firm & society.
Conventional
-accountable and provide useful information
mainly to shareholders, lenders & creditors.
2. Measurement
Zakat as a cornerstone of determining
measurements tools
-concept in Islam deals with specifically
with measurement of assets,
-one of the 5 pillars of Islam,
-development of accounting in early
Muslim government
Based on the selling price prevailing at the
time zakat fall due
Apply current cost not HC
3. Disclosure & Presentation of
Information
Economic performance / financial
statements
Social responsibilities information
Zakat information
Any prohibited transaction
Non-fulfillment of contract
Value added statement
Q8. Shortcoming of conventional historical
cost accounting from Islamic perspective.
Historical cost has no syariah basis to
applied in an islamic perspective,
The contract fulfillment principle cannot
be used,
Use current value measurement (CVM)
-disclose the truth as it is
-HC would lead to the understated
valuation
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