Accounting systems and recording procedures practiced in Muslim Society commenced before the invention of the Arabic numerals

(early 9th Century A.D by Al-Khawarizmy) in response to religious requirements (zakat) in the year 2 Hijrah (624 A.D)

To further ADVANCE our accounting history knowledge ii. To explore the work of early Muslims scholars
i.

Zakat and expansion in the revenues

and expenditure
Structure of business

The religion

Accounting systems developed and practiced in parts of the Muslim World

WERE ADVANCED !!!

The role played by Indian accountants in the development of accounting prior to Paciolis Summa of 1494

The earliest treatise on accounting is generally thought to be Pacioli's Summar of 1494. The Bahi-khata is a double-entry system of bookkeeping that predates the Italian method by many centuries. Its existence in India prior to the Greek and Roman empires suggests that Indian traders took it with them to Italy, and from there the double-entry system spread through Europe. The Bahi-khata is described and its double-entry principles explained.
References:
http://onlinelibrary.wiley.com/doi/10.1111/j.1467-6281.1986.tb00132.x/abstract

Solas & Otar

The rudiments of double entry accounting were practiced in the Near East (India etc) The principles were developed independently from the accounting practices used in the west (Muslim world)

Islam has the potential for influencing : The Structure Underlying Concepts The mechanisms of accounting in Islamic world

Hamid et al

Sieveking
Book-keeping arose as a direct result of the establishment of partnerships on a large scale

Lieber
Italian traders obtained their knowledge of sophisticated business methods from their Muslims counterparts

Heaps

The first European who translated algebra from the writings of the Arabians is supposed to have written the first treatise on bookkeeping

Bookkeeping would first be practiced by the first considerable merchants, and as these were the Arabians.

The development of accounting and other sciences in Muslim society was initiated by the teachings of Islam

 Islam was founded in Makkah

610 A.D
Establishment of the Islamic state (Al-Madienah Al-Munawwarah) Principle of brotherhood (foundation for social harmonization) Commenced the study, interpretation and application of what was revealed in the Quran (social & commercial teachings)

622 A.D

624 A.D (2 H)

Introduction and imposition of Zakat It encourage the development of accounting

634 644 A.D

Ruler : Omar Al-Kattab Formal introduction of accounting books, concepts and procedures

768 A.D

Developments and practices were documented by a number of early Muslims scholars (printed and handwritten books)

976 A.D

The title of Al-Kateb being used Work of Al-Khawarizmy, Mafateih Al-Uloom (Keys of Sciences) appeared

Invention of Arabic numerals by Al-Khawarizmy

9th century

12 A.D 14 A.D

Crusade War

Types of records maintained in the Dewans

Describe the accounting systems that were practiced in 10th century

Mafatieh AlUloom (Keys of Science)

The books used to record accounts

Duties of secretary

1363 A.D

Al-Mazendarany documented the practice of accounting in Muslim society Risalah Falakiyyah Kitabus Siyakat (Arabic) or Risale-I Felekiyya (Turkish) Describe accounting systems used in Islamic state in greater detail than AlKhawarizmy

Luca Paciolis Summa de Arithmetica been written

1494 A.D

Imposition of Zakat

Income statement oriented

Establishment of Dewans

ACCOUNTING SYSTEMS DEVELOPED IN MUSLIM SOCIETY

Bookkeeper/a ccountant is called as AlKateb Reflect the type of projects undertaken by the Islamic State Documented by AlKhawarizmy

Stable Accounting (Accounting for Livestock)

The system was supervised by a stable manager Transactions and events be recorded as they occurred Example: Animals (purchased, sold, died), caretaker wages, food for camels etc. Importance: Livestock assets to individuals and state
Private Sector: - Consumption - Transportation - Payment of zakat (for entrepreneur)

Construction Accounting
To account for construction projects undertaken by government Required the maintenance of separate journal, recording of relevant transactions and events for each construction site Transactions were recorded by PIC architect Items recorded in journals; materials received, wages paid to carpenters and etc. Importance: - Internal control and progress of construction site - Surplus/deficit in any accounts would be noted

Rice Farm Accounting (Agricultural Accounting)

Non monetary system required the recording of quantities of rice received and disbursed and the specification of the fields that produced the rice. Did not indicate a segregation of duties between recording and managing the inventory. Designed for state-owned rice farms or for the purpose of accounting for the rice received and distributed as zakat in kind rather than in monetary form. Required recording of receipts and issues of grain in physical terms and without reference to money measurement.

Warehouse Accounting
To account for states purchase of supplies Required the detailed recording of the type of goods received and the source of delivery in books prepared for the purpose Not stated the recording of goods received and issued was in monetary terms only, or in physical and monetary terms, though the latter appears most likely in practice. The store man personally liable for any short fall between the book and actual inventory

Mint Accounting (Currency Accounting)

Designed and implemented in the Islamic state before the 14th century A.D. Required the immediate conversion of gold and silver received by the mint authority into bullion and coins to the person in charge Required the use of 3 specialized journals inventory, revenue and expenses Purchases and wages were examples of costs incurred by the mint authority Mandatory to record the terms and conditions of the services provided by the mint authority in the expenses journal

Sheep Grazing Accounting

Initiate and implement by government authorities in the Islamic state and its use by private entrepreneurs to measure the profit or losses for the purpose of zakat is likely. Items recorded; animals given to grazier or shepherd, revenue received either in cash or kind Revenue in kind received by the grazier included animals and sheep products. Losses include those due to natural disasters such as drought.

Treasury Accounting
Used by government required daily recording of all treasury receipts and payments. Monetary and non monetary measurements recording treasury receipts and disbursements were in cash and kind. Required the provision of separate columns for cash transactions. Non cash transactions - classified according to nature, color and other specifications. Encompassed 2 methods of recording arabian method and persian method

 Examples of recording procedures developed and applied by government authorities and

individual entrepreneurs in the Islamic state are as follows :

1. Transaction to be recorded immediately when they occurred

2. Transaction were to be classified according to their nature. This required similar and homogeneous transactions to be classified under one account and recorded as such

3. Receipts were to be recorded on the right hand side of the page and sources of receipts were to be identified and disclosed.

4. Payments were to be recorded and sufficiently explained on the left hand side of the page.

5. Recorded transactions were to be carefully explained.

6. No space was to be left between transaction. If a space was left, a line had to be drawn across the space. This line was called Attarkeen

7. Corrections to recorded transactions by overwriting or deleting were prohibited to Al-Kateb (the accountant/bookkeepe r)

8. When the account was closed, a specific sign was to be placed in the books to reflect the closure of the account.

9. All similar transactions recorded in the preliminary book were to be posted to the specialized books maintained for that that type transaction.

10. The posting of similar transactions was to be performed by person independent from those who recorded the transactions in the daily and other books.

11. The balance, called Al-Hasel (the difference between two amounts, had to be extracted.

12. A monthly or yearly report was to be prepared. This report had to be detailed and provide sufficient information to determine.

13. At the end of each financial year, a report was to be prepared by Al-Kateb detailing all goods and funds under his custody and management.

14. Annual reports prepared by Al-Kateb were to be reviewed (audited) and compared with prior year reports and with records maintained in the main Dewan.