NURANIS QHALEEDA BINTI AHMAD PESAL (141846)

Subject: Summary of Foundation and development of Islamic accounting

First and foremost, the Islamic Accountability has formed the foundation or primary
objective in Islamic Accounting, the extent to which the objectives for which the resources were
entrusted by both accountees have been achieved. The example of Islamic Accountability is to
emphasise on the transcendental accountability to Allah SWT (Hablumminallah), Social
accountability to the society (Hablumminannass) and many more. Via these similar principles we
may then extend it to the real objective of creating financial records that are consistent with the
shariah. Islamic Accounting objectives is also proven in Surah Al-baqarah 282, which gives us a lot of
lesson about the importance of proper recording, fear god in recording transactions and many more.

Next, I have also learned about the distinction of the presentation of financial statements
between conventional and Islamic accounting. The differences can be seen in their aim,
accountability, and disclosure of the financial report. For example, the aim of preparing statement of
income by conventional only emphasise on one aspect which is financial performance whereas in
Islamic, they concerned on the fulfilment of Amanah (Trust) of financial resources and financial
performance. Furthermore, the features of Islamic accounting is no different in terms of recording
(I.e. Double entry). The accounting concepts such as prudence, historical cost vs. current value are
modified to meet Shari’ah compliance.

On top of that, the Islamic financial institutions such as AAOIFI has been developed to
enhance the confidence in users of financial statements of the IFIs and they ultimately promote IFIs.
The objective of AAOIFI is to develop accounting and auditing thought relevant to IFIs. In addition,
the objectives of its reporting are to determine the rights and obligations of interested parties, to
safeguard entity assets and rights of others etc. AAOIFI also provide accounting standards such as
FAS1 until FAS23 to provide guidance for Islamic institutions that use shari’ah compliance to run
their economic activities.

Lastly, there are six impact of Shari’ah contractual conditions on accounting concepts. There
is existence, lawful, measurable, deliverable, equitable and accountability. For instance, under
accountability the annual records are completely reported and disclosed in order to assess the halal
and forbidden profits and properties. The accounting concepts that is being used in Islamic
accounting are accounting unit, periodicity, going concern, monetary and stability of unit
measurement, prudence and conservatism etc.