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MUSHARAKAH CASE STUDY

Partner admitted to the Joint venture

Crescent Publisher in an Islamic book publishing company is owned by Abdullah. Abdullah


valued the business through a consultancy company and the current worth of the business is
$ 25,000. Abdullah got a contract from an international publisher to publish the book in the
local language. The contract is signed for one year and Abdullah is in need for $ 15,000 as
working capital to run the operation. Abdullah approached his friend Anwar and Anwar agreed to
become the partner under the Musharaka contract sharing profit and loss. The net income is to
be shared between the partners. Both agreed to share the profit and loss equally

a) Find how much Abdullah and Anwar will get if the value of the joint venture is $
50,000 at the end of the year.

25,000 + 15,000 = 40,000

An increase in the value = 50,000 – 40,000 = 10,000

10,000/2 = 5,000

$ 5,000 for Abdullah and $ 5000 for Anwar

So Anwar will get $ 5000 + $ 15000 = $ 20,000 from the contract.

The profit is 5000/15000 * 100 = 33.33%2.

b) Find if there is loss of $ 10,000 in the business

The loss will be shared based on Capital contribution.

Capital contribution Abdullah (60%) and Anwar (40%).

So, Anwar will get (15,000 – 4000) = $ 11,000 at the end of the contract.