Professional Documents
Culture Documents
Occident Vs Islam
Islam Unity of God and Power is hold by God There is a judgment day in which mankind pay responsibility during his/her life before the God There is hell and heaven fulfilled by mankind Social justice
Occident Power hold by mankind (ratio) No judgment day, world is the end of life. No judgment day. No heaven and no hell Individual welfare
What is Islam?
Literally meaning: Peace (in this world and hereafter) obedience to Allah as his/her God, comply with the motivation of Gods creation of Man, which is to serve Allah, to be his viceregent on earth. A comprehensive worldview, a unity of God, and an integration between world and hereafter. Islamic principles: truth, justice, fair, goodwill, honesty, benevolent, accountability before the God.
Islamic Rules:
Allah (God) gives two guidance for mankind: al-Quran (revealed world of God ) and Hadist/Sunnah: Prophet Saying, Gods inspired acts, description of the conduct of the prophets companion of which Mohammad was uncritical. Ijtihad/ijma: shuratic and consensus process. Guidance are related to all daily life of mankind including in business, management, and finance. The phenomena of nature can be also a sign of Gods power and existence.
Islamic Accounting
1. To report accurate income determination 2. To promote efficiency and leadership 3. To comply with the shariah (Islamic principles) 4. Commitment to justice 5. To report a good things 6. To adapt to positive social change. (Khan, in Harahap, 1992)
Conventional vs Islamic Accounting: (Boudyn and Willet, Islamic Corporate Reports, Abacus, Vol. 36, No.1, 2000).
Conventional Acc. Economic rationalism Secular Individualistic Profit maximization Survival of fittest Process Absolute ownership
(Ec. rationalism: the desire to stand apart from others, to compete, to manipulate and to amass surplus)
Islamic Acct. Unity of God Religious Communal Reasonable profit Equity Environment Relative ownership
Conventional Accounting Individuality oriented Focus on individuality aspect without consider any social aspects Accounting Law and Ethics Secular
Hayashi (Continued)
Islamic Accounting No differentiation between Normative and Descriptive Accounting (They always going simultaneously) In operational, they do everything in boundaries of Islam (Shariah) Measure as saleable value Market (selling) price rather than historical cost Conventional Accounting The normative accounting always influencing descriptive accounting or individuality interest
In operational, they permit everything to reach the highest profit Measure as highest possible profit Historical Cost
[Entity]Separation between business and owners [going concern] Business continues forever [Accounting period] Periodical measurement of performance [unit of measure] Monetary Value [Full disclosure principle] Decision making process [objectivity] Reliability of measurement [Materiality] Relative importance of information for decision making [Consistency] Consistency based on GAAP [Conservatism] Use least favorable impact on owners
Firm doses not have separate financial obligation (I.e profit sharing scheme) Depend on contractual agreement between party One lunar year for zakat calculation Quantity based and monetary based (zakat calculation) Importance for fulfillment of duties and obligation to God, society and individual. Clear conscience with God in fulfilling all duties. Consistence to shariah rules Most favorable to society (justice)
Problems of Rationalism
The supreme power lies on human or power holder not on God Man guided by the concept of self interest and overlook the social interest Man has no inherent justice but true opportunists. Social imbalance and social conflicts due to concentration of wealth and power in a few elites Global ecological destruction
What next?
The Islamic accounting which has implicit economic, political and religious meaning (an integrated world view system, author), has the possibility to show the key to a post Newtonian Accounting (Western Secular based accounting, author) (Hayashi, 1989)
Future
I hope this discussion may help us to establish our own system comply with our traditional culture and believe, not interfered by other believes.