Tuesday, June 26, 2012

FAR 600 : Islamic Accounting

My own simple notes for parts of article by Dr. Shahul Hameed,here.

What is Islamic Accounting?
-Accounting process which provides info to stakeholders of an entity which enable them to ensure that the entity is continually operating within Shariah bound and delivering its socio-economic objectives.

Comparison between Islamic Accounting (IA) with Conventional Accounting (CA)

Objectives of providing info:

Islamic Accounting (IA)
  • To enables users to ensure that Islamic organisation abide by the principles of Shariah in its dealings.
  • To ensure the assessment of whether organization objectives are being met.
  • Try To achieve certain socio-economic objectives encouraged by Islam.
Conventional Accounting (CA)
  • Ultimate purpose: To help users make appropriate decisions on their investments.
Type of information:
Islamic Accounting (IA)
  • Identify socio-economic,religious events and transactions.
  • Uses the concept stewardship: prepare final account ; balance sheet,Profit & Loss
  • Identify economic events and transactions.
Conventional Accounting (CA)
  • Uses the monetary measurement concept ; prepare financial statement.
Measurement, Valuation, Recording & Communication:

Islamic Accounting (IA)
  • Current value is an obligation, for the purpose of Zakat.
  • Due to prohibition of interest-based income, profit determination is more important.
  • Uses holistic approach,where both financial & non-financial measure regarding economic,social,environment,etc are being measured and reported.
  • Value Added Statement suggested.
Conventional Accounting (CA)
  • Mainly uses the historical cost because it does not involve Zakat.
  • The idea of using current values was given up due to its complexity and presumed lack of objectivity.
  • Income Statement suggested.

Users of the information: 
Islamic Accounting (IA)
  • Serves the gamut of stakeholder,while making sure of  money made from ethical manner, do not harm others and distribution of wealth among member of society.
Conventional Accounting (CA)
  • Recognised various stakeholders, but focuses more on shareholders and creditors
  • From recent development in finance and financial markets, accounting seems to be serving an elite group of financiers market players and banks and other financial institutions.
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| 

Past years questions:
APR 2010: Question 1,a
i: Meaning of Islamic Accounting.
~Accounting process which provides info to stakeholders of an entity which enable them to ensure that the entity is continually operating within Shariah bound and delivering its socio-economic objectives.
ii: Why Islamic accounting is considered more holistic in nature?
~Does not mainly focus on material / financial aspects but all aspects.
~Both financial & non-financial measure regarding economic,social,environment,etc are being measured and reported.
~Encourages ethical manner in dealings.
~Wealth maximization for the shareholders is not the main goal. Others also taken into account,thus the distribution of Zakat.

||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||

No comments:

Post a Comment

Say something... ^_^