7/31/2019 INTRODUCTION TO THE ACCOUNTING FRAMEWORK AND
PRINCIPLES FOR ISLAMIC FINA NCIAL INSTITUTIONS
1/2
1. INTRODUCTION TO THE ACCOUNTING FRAMEWORK AND PRINCIPLES FOR
ISLAMIC FINANCIAL INSTITUTIONS
O ye who believe! When ye deal with each other in transactions
involving futureobligations in a fixed period of time, reduce them
to writing; let a scribe write down faithfully as between the
parties; let not the scribe refuse to write;as Allah has taught
him, so let him write ...
With the conviction that the recording of financial transactions
is a divine commandment, the field of study known as Islamic
accounting was created.
The conventional and Islamic accounting
Conventional accounting;the identification, recording,
classification, interpreting and communicating ofeconomic events to
permit users to make informed economic decisions whose ultimate
purpose is to efficiently allocate scarce resources available
totheir most efficient (and profitable) use.
Islamic accounting;Islamic accounting can be defined as the
accounting process which providesappropriate information (not
necessarily limited to financial data) to stakeholders of an entity
which will enable them to ensure that the entity is continuously
operating within the bounds of the Islamic Sharia and
delivering
on its socioeconomic objectives.
Framework and objectives of Islamic accountingObjective1. To
provide a fair basis for the calculation of zakah.2. Avoid disputes
among members of the through provide a fair basis for sharing of
profits, wealth transfers and full disclosure of activities and
values.3. Promote and ensure only Islamically permitted economic
activities are carried out by the business and ensure the quest for
profits by the business doesnot infringe societys right (e.g. for a
clean environment, fair employment practices, contribution to the
well-being of the community etc.)
The Differences between Islamic & Conventional
AccountingObjectives Conventional accounting aims to permit
informed decisions whose ultimate purposis to efficiently allocate
scarce resources available to their most efficient. Islamic
accounting hopes to enable users to ensure that Islamic
organizations aide by the principles of the Shariah in its
dealings.Type of information Conventional accounting concentrates
on identifying economics events and transations.
Islamic accounting must identify socio-economic and religious
events and transations.Valuation Conventional accounting mainly
uses historic cost (or lower) to measure and vales assets and
liabilities. From an Islamic point of view, at least for the
purpose of computation of Zakahcurrent valuation is
obligatory.Users Conventional accounting seems to be serving an
elite group of financiers markplayers and banks and other financial
institutions.
