CHAPTER 8:

ACCOUNTING
FOR IJARAH
FINANCING
DEFINITION OF IJARAH

Technically: Islamic Banking:

A contract of Islamic Fiqh: A process by which
exchange in which the “usufruct of a
Literally: Wages paid to a
one party enjoys particular property is
person in
To give something on benefit arising from transferred to
consideration of the
rent employment by another person in
services rendered by
another party in exchange for a rent
him
return for claimed from
consideration him/her”
 AAOIFI:
OWNERSHIP OF THE
ACCOUNTING FOR RIGHT TO THE BENEFITS
Click icon to add picture OF USING AN ASSET IN
IJARAH FINANCING RETURN FOR
CONSIDERATION
OPERATING IJARAH:
NO TRANSFER OF TITLE TO LESSEE

IJARAH MUNTAHIYAH BITTAMLEK:

(OWNERSHIP IS TRANSFERRED TO
LESSEE)
 PILLARS OF IJARAH

Sighah Makjur
Muajir Mustakjir
(Offer and (Subject
(Lessor) (Lessee)
Acceptance) Matter)

Ujrah
Manfaah
(Payment
(Services
of the
or Asset)
lease)

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MODUS OPERANDI

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MODUS OPERANDI OF AITAB/AIMAT
4. Tra
n
cont sfer of o
ract
or hi wnership
bah throu
3. Pa gh pu
y in d rcha
eferr se
ed p
ayme
1. Pr nts
omis
e to
make
an ag
reem
2. Buy and pay 90% of the asset ent
on the lump sum basis

t he asset
e pos it o f
10 % d
1. Pay
AAOIFI recognized that Operating Ijarah is where the title of
assets is not transferred to the lessee.
But for Ijarah Muntahia Bitamleek, it involves two contracts
which are:

Gift
Leased over the
lease period
Ijarah Muntahia
Token Price
Bitamleek
Transfer of
ownership at the
end of contract
Equivalent

Gradual Transfer
 TRANSFER OWNERSHIP METHODS

Transfer Ownership Methods

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Transfer prior to the
Gift Token Consideration end of a lease for a Gradual transfer of the
(transfer of legal title for or other amount as price equivalent to the legal title (sale) of the
no consideration) specified in the lease remaining ijarah leased asset
instalments
RECOGNITION OF ASSET & INCOME OF IJARAH MUNTAHIA
BITAMLEEK (AIMAT):

PURCHASE OF IJARAH
ASSET BY THE LESSOR

Dr. Ijarah Asset Account

Cr. Cash Account Dr. Cash Account
Cr. Profit and Loss Account

RECEIPT OF RENTAL INCOME

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RECOGNITION OF ASSET & INCOME OF IJARAH MUNTAHIA
BITAMLEEK (AIMAT) CONT. :

AMORTIZATION OF IDC

Dr. Profit and Loss Account

Dr. Profit and Loss Account
Cr. Initial Direct Cost Account
Cr. Accumulated
Depreciation Account

DEPRECIATION OF IJARAH

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 TRANSFER OF OWNERSHIP :

BY GIFT Dr. Profit and Loss account

(loss on disposal)
Dr. Profit and Loss account
Dr. Cash account (Lessee paid)
(loss on disposal)
Cr. Ijarah Asset account
Cr. Ijarah Asset account
(Residual value)
(Residual value)
TOKEN PRICE OR PRE-
DETERMINED PRICE

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 TRANSFER OF OWNERSHIP (CONT.) :

EQUIVALENT PRICE

Dr. Cash account Cr. Ijarah Asset account

(Residual value)

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AL IJARAH THUMMA AL-BAI’ (AITAB)

Consists of 2 different contracts.

Mode of Ijarah Financing especially
i.e. lease contract and purchase
for automobile financing
contract

All the costs related to the assets

Penalty can be imposed on the will be borne by the lessee as the
late payment and default of the beneficial owner including takaful
customers to protect the asset and road tax
expenses
DIFFERENCES BETWEEN AIMAT & AITAB

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 Profit and Loss

THE END 
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