ACCOUNTING FOR ISLAMIC BANK TRANSACTIONS

ACCOUNTING FOR ISLAMIC BANK TRANSACTIONS

ACCOUNTING FOR ISLAMIC BANK TRANSACTIONS Hanudin Amin PENERBIT UNIVERSITI MALAYSIA SABAH KOla Kinabalu Sabah Malaysia http://w"w.ums.edu.my 2014 A M<-mber oflhe Malavslan Scholarly Pubhshong Counc.1 (MAPIM)

Universiti Malaysia Sabah, 2008 Reprinted 2014 All rights reserved. No part of this puhlication may he n'producn, distrihuted, stored in a datahase or retrieval system, or transmiht>d, in any form or h}' any mt>ans, E'1E'Ctronics, me'chankai. graphic, recording or otherwise, without the prior written permission of Penerhit Universiti Malaysia Sahah, except as permitted hy Ad 332, Malaysian Copyright Act of 1987. Permission of rights is suhje'cted to royalty or honorariulll paymt>nt. Pent>rhit Lniversiti \lalaysia Sahah makes no rt>presentation-e"press or implil'd, with n'gard to the accuracy of infornldtion contained in this hook. Lsers of the information in this hook need to verify it on their own hefon' utilizing sulh information. Views expressed in this ruhlicdtion are- thost> of the author(s) and do not necessarily reflt'l-t the opinion or policy of Uni\'ersiti ~ldlaysia Sahah. Pt>nerhit VniVt'rsiti Malaysia Sahah shall not he responsihle or liahle for an~' special, consequential, or exemrlary prohlems or damages resulting in whole or rart, from the reader's use of, or reliance uron, the conlt'nts of this hook. Perpustakaan Negara ~lalaysia Hanudin Amin Accounting for Islamic hank transartions / Hanudin Amin. Includes index Bihliograrhy: p. 99-100 ISB:'\1978-967-5224-06-5 1. Ac(Ounting-lsldmic countries. 2 Bcmks and hdnljng-religious dspt'l1so-1siam. 3. Economks-Rt'ligious aspt>t:t-blam. I. Tillt>. 657.088297 Typeface for text: Te"t ~'pe and leading sizt>: Publishl'd by: Printl'd hy: Book Antiljua 11/13.2 points Penerhit Uni\'ersiti Mala\,sid Sahah Tingkat Bawah, Perrus~kaim Vniversiti ~Ialaysia Sahdh Jalan V\IS 88-tOO Kola Kinabalu, Scthdh Percetakan Keningau Sdn. Bhd. Lot 26, Phdse I, HSK Industrial Centn', Km 8, Jalan Penampdng. 88.300 Kold Kinahdlu, Scthah

To my family, with love, Zuraidah Anis, Muhammad Nour Imran and Nasrullah.

.. ''"!'ft is List of Figures List of Tables Preface Glossary CONTENTS -..w.-..n". --'_... viii viii ix x Chapter 1 \\-'hat is an Islamic Accounting? 1 Chapter 2 Islamic Accounting Standards 11 Chapter 3 Mlldam/mfl Accounting 33 Chapter 4 Mllslmmkalz Accounting 43 Chapter 5 Mil m/mlml' Accounting 57 Chapter 6 Salalll Accounting 71 Chapter 7 fjaml' Accounting 79 Chapter 8 Znkat Accounting 91 Chapter 9 Auditing in Islamic Accounting 105 Sample of Exercises 113 Bibliography 121 Appendix 125 Index 127 vii

LIST OF FIGURES Figure 1.1 Islamic accounting standards development 5.1 Murabahah concept 5.2 Murabahah to the rurchase orderer Page 9 58 61 LIST OF TABLES Table Page 5.1 The differences between Murabahah, MPO and BBA 60 7.1 The differences between Ijarah and AIT AB 83 9.1 The differences between SSB and external auditors 110 viii

GLOSSARY M/lraballall Bai BilIlaIllall Ajil 5alalll MII~/lI1rakall Mllt/araball ljllrall Zakat 51l11rialt Riba GllI1rar Wadlall Rabbllill/al Mlldtlrib Famid lklltikar 5adaqalr Waqf Fahl'a Fllqallll Fi'lll ljaralr MlllltalllOa Biltllllllcck Alljamil TII/IIIIII/a al bay HClIlislr gctfyyall Mllrabal",Jr to tile p"rclll1st? ortiaer Halal MlIsJrarakalt Mlltllllllqisllll AI-M/ldarabalr AI-Mil tlaqall Al-M/ldllmbllil AI-M(1t]lIytJlldllll Qard Mark-up sale Deferred payment sale Deferred delivery sale Profit and loss sharing Profit sharing Leasing Compulsory levy for Muslims A way of life (Muslims) Interest Uncertainty Safe custody Provider of funds Entrepreneur Inheritance divisions according to al-quran Exploitative monopoly Gift, voluntarily given Charitable endowments Unanimous opinion Fiqh expert Understanding Ijarah form, ownership is changed from lessor to 1t.>SSt.'e Ijarah form, two contracts sale and leasing Deposit Involves financier, supplier and purchase in Murabahah Permitted Diminishing Mushara"ah General investment account Specific investment account Loan x