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ACCOUNTING IN ISLAM Prepared by: JURIAH BINTI LATIF SHARMA BINTI JABIR AZIZAH BINTI YAHPAR
ACCOUNTING IN ISLAM Prepared by: JURIAH BINTI LATIF SHARMA BINTI JABIR AZIZAH BINTI YAHPAR
ACCOUNTING IN ISLAM Prepared by: JURIAH BINTI LATIF SHARMA BINTI JABIR AZIZAH BINTI YAHPAR
ACCOUNTING IN ISLAM
ACCOUNTING
IN
ISLAM

Prepared by:

JURIAH BINTI LATIF

SHARMA BINTI JABIR

AZIZAH BINTI YAHPAR

Q1: Historical development-5 t h to 12 century  The religion of Islam start in
Q1: Historical development-5 t h to 12 century  The religion of Islam start in
Q1: Historical development-5 t h to 12 century  The religion of Islam start in
Q1: Historical development-5 t h to 12 century  The religion of Islam start in

Q1: Historical development-5 th to 12 century

Q1: Historical development-5 t h to 12 century  The religion of Islam start in Makkah

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)

4) Warehouse accounting 1) Accounting for live stock Accounting System 2) Construction accounting 3) Agricultural
4) Warehouse accounting 1) Accounting for live stock Accounting System 2) Construction accounting 3) Agricultural
4) Warehouse accounting
4)
Warehouse
accounting
1) Accounting for live stock
1)
Accounting for
live stock
Accounting System
Accounting
System
2) Construction accounting
2)
Construction
accounting
3) Agricultural accounting
3)
Agricultural
accounting
5) Currency accounting Accounting system 6) Sheep Grazing accounting 7) Treasury accounting
5) Currency accounting Accounting system 6) Sheep Grazing accounting 7) Treasury accounting
5) Currency accounting Accounting system 6) Sheep Grazing accounting 7) Treasury accounting
5) Currency accounting
5)
Currency
accounting
Accounting system 6) Sheep Grazing accounting
Accounting
system
6) Sheep
Grazing
accounting
7) Treasury accounting
7)
Treasury
accounting
Accounting Record Jaridah Jaridah Al- Kharaj Jeridah Al- Mal Jaridah Al- Musadareen Daftar Al- Tawjihat
Accounting Record Jaridah Jaridah Al- Kharaj Jeridah Al- Mal Jaridah Al- Musadareen Daftar Al- Tawjihat
Accounting Record Jaridah Jaridah Al- Kharaj Jeridah Al- Mal Jaridah Al- Musadareen Daftar Al- Tawjihat
Accounting Record
Accounting Record

Jaridah

Jaridah Al-

Kharaj

Jeridah Al- Mal

Jaridah Al- Musadareen

Daftar Al-

Tawjihat

Jaridah

Annafakat

Daftar Al-

Yawmiah

Types of accounting reports Al-Khitmah Al-Khitmah Al-Jame’ah
Types of accounting reports Al-Khitmah Al-Khitmah Al-Jame’ah
Types of accounting reports Al-Khitmah Al-Khitmah Al-Jame’ah
Types of accounting reports Al-Khitmah Al-Khitmah Al-Jame’ah
Types of
accounting
reports
Al-Khitmah
Al-Khitmah
Al-Jame’ah
 The development of accounting records & reports in the islamic state have most likely
 The development of accounting records & reports in the islamic state have most likely
 The development of accounting records & reports in the islamic state have most likely

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 Zakat Baitulmal,
Q2: Factors behind the development
islamic accounting records & reports in
Muslim civilization
Zakat
Baitulmal,
Religously
Development
Waqf ,
motivated
Diwan2
Geographical
expansion
Q3:The features of accounting practice Based on syariah/islamic ethics & islamic eco. -Accountibility to society
Q3:The features of accounting practice Based on syariah/islamic ethics & islamic eco. -Accountibility to society
Q3:The features of accounting practice Based on syariah/islamic ethics & islamic eco. -Accountibility to society
Q3:The features of accounting practice
Q3:The features of accounting practice
Based on syariah/islamic ethics & islamic eco.
Based on syariah/islamic ethics & islamic eco.
Based on syariah/islamic ethics & islamic eco.

Based on syariah/islamic

ethics & islamic eco.

Based on syariah/islamic ethics & islamic eco.
Based on syariah/islamic ethics & islamic eco.
Based on syariah/islamic ethics & islamic eco.
Based on syariah/islamic ethics & islamic eco.
-Accountibility to society -Full disclosure
-Accountibility to society -Full disclosure
-Accountibility to society -Full disclosure

-Accountibility to society

-Full disclosure

-Accountibility to society -Full disclosure
-Accountibility to society -Full disclosure
-Accountibility to society -Full disclosure
-Accountibility to society -Full disclosure
Support socio-justice
Support socio-justice
Support socio-justice
Support socio-justice

Support socio-justice

Support socio-justice
Support socio-justice
Support socio-justice
Support socio-justice
Q4:The world view behind the theory and practice of conventional accounting.
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
Continued… Practice  Western world view and form the basis of accounting system  Relies
Continued…
Continued…

Practice

Continued… Practice  Western world view and form the basis of accounting system  Relies on
Continued… Practice  Western world view and form the basis of accounting system  Relies on

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
accounting information and conventional
accounting
Islamic
Conventional
and conventional accounting Islamic Conventional System • Syariah regulations • 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

Disclosure of all necessary information

Information that would have impact on economic decision

Reliability

True and complete, raliable and financial disclosure for them

Verifiability, faithful representation, substance over form, neutrality,

Faithful

presentation

Presented correctly and fully including details for all the transaction undertaken

prudence and completeness

Must represent fully all transactions it purports to represent

Q6. Difference between Conventional and Islamic financial reporting perspective ISSUE CONVENTIONAL ISLAMIC
Q6. Difference between Conventional and
Islamic financial reporting perspective
ISSUE
CONVENTIONAL
ISLAMIC
reporting perspective ISSUE CONVENTIONAL ISLAMIC Objectives • Accountability to stakeholders • Assist

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

CONVENTIONAL ISLAMIC ISSUE Reports • Balance Sheet • Income Statement • Cash Flow Statement •
CONVENTIONAL ISLAMIC ISSUE Reports • Balance Sheet • Income Statement • Cash Flow Statement •

CONVENTIONAL

ISLAMIC

CONVENTIONAL ISLAMIC ISSUE Reports • Balance Sheet • Income Statement • Cash Flow Statement • Environmental

ISSUE

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

ISSUE CONVENTIONAL ISLAMIC Disclosure Limited disclosure • Economic • Environmental • Social such as

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
1. Objectives
disclosure and presentation of information. 1. Objectives -Rizal Yaya & Shahul Hameed (2006)  Decision

-Rizal Yaya & Shahul Hameed (2006)

Decision usefulness Stewardship

Islamic Accountability

 Decision usefulness -provide information that is useful in making business and economic decision. -information
 Decision usefulness -provide information that is useful in making business and economic decision. -information

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

islamic syariah -information about financial position and performance -cash flow information -information to assist

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
 Stewardship -contribute to the safeguarding of the assets, and to the enhancement of the
 Stewardship -contribute to the safeguarding of the assets, and to the enhancement of the

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
 Islamic Accountability -premised on both the accouter & the accountee having dual accountabilities -arise

Islamic Accountability -premised on both the accouter & the accountee having dual accountabilities

-arise from concept khilafa; accountable to

accountabilities -arise from concept khilafa; accountable to Allah on the day of judgment for all resources

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.

Measurement 2.  Zakat as a cornerstone of determining measurements tools -concept in Islam deals
Measurement 2.  Zakat as a cornerstone of determining measurements tools -concept in Islam deals
Measurement 2.  Zakat as a cornerstone of determining measurements tools -concept in Islam deals

Measurement

2.

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
3. Disclosure & Presentation of Information  Economic performance / financial statements  Social

3. Disclosure & Presentation of Information

3. Disclosure & Presentation of Information  Economic performance / financial statements  Social

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.
Q8. Shortcoming of conventional historical
cost accounting from Islamic perspective.
historical cost accounting from Islamic perspective.  Historical cost has no syariah basis to applied in

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