COMPARE THE CHARACTERISTIC

OF ISLAMIC ACCOUNTING

VERSUS CONVENTIONAL

ACCOUNTINGZul Husni Bin Ag Damit

Mohd Hafiz Bin Amat

Muhammad Hafizuddin Bin Shamsuddin

Madsan Bin Salimeu

Prepare by:

INTRODUCTIONISLAMIC VS CONVENTIONAL ACCOUNTING Islamic Accounting – Accounting process

which provides appropriate information to stakeholders of an entity which will enable them to ensure that the entity is continuously operating within the bound of the Islamic Shari’ah and delivering its socioeconomic objectives.

Conventional Accounting – Identification, recording, classification, interpreting and communication of economic events to permits users to make decisions.

DIFFERENCE BASED ON…1. The objective of providing the

information.2. Types of information that are

identified.3. How is it measured?4. User of the information

1) THE OBJECTIVE OF PROVIDING THE INFORMATION.

Conventional Accounting – As an aid to make decision whose ultimate purpose is to efficiently allocate scarce resources available to their most efficient uses by providing information efficiency in the market.

Islamic Accounting – Enable user to ensure that Islamic organisations abide by the principles of the Shari’ah in its dealings and enables the assesment of whether the objectives of the organisations are being met.

2)WHAT TYPE OF INFORMATION IS IDENTIFIED?

a. Concentrate b. Reason

2)WHAT TYPE OF INFORMATION IS IDENTIFIED?

Conventional Accounting Islamic Accounting

identifying economic events and transactions

identifying socio-economic and religious events and transactions.

Americanization of the curriculum has popularized the term financial statements. Hence, the concentration of accounting has moved from steward’s manorial account to accounting for money

Islamic accounting must be holistic in its reporting. Hence, both financial and non-financial measures regarding the economic, social, environmental and religious events and transactions are measured and reported.

3). HOW IS IT MEASURED?

Conventional Accounting Historic cost to measure and values

assets and liabilities. Arose from the needs of bankers and

shareholders. Interest-based bankers who are

interested - capital and interest are repaid.

Valuation of assets-historical cost but anticipating all liabilities in conservatism concepts .

Islamic Accounting Computation of zakat- current valuation

is obligatory. Zakat based on historical cost valuation

would yield lower receipts in times of inflation or rising costs. 

Current values would satisfy Islam’s concept of justice.

 

4) TO WHOM IS IT COMMUNICATE(THE USERS)?

ISLAMIC ACCOUNTING CONVENTIONAL ACCOUNTING

CONVENTIONAL ACCOUNTING

ISLAMIC ACCOUNTING

Shareholders Creditors Elite group of

financer Market player Banker Other institution

Reason:- Helping a group of

rich people get richer

Gamut of stakeholder recognized by cooperate report

Reason:- Ensure they comply

with shari’ah principle Do not harm other while

making money ethically Achieve equitable

allocation and distribution of wealth among members of society

The uniqueness of Islam lies in its practicalities - not merely a belief but is a complete way of life.

This can be analogically be seen from Islamic faith whereby for every human, 2 angels accompanied them at right and left shoulders, record every good deeds and sins (the double-entry bookkeeping principles?)

mentioned comprehensively in Quranic verses, portrayed to shoulder responsibility of social and economic justice

In recent years - conventional accounting - suffers from the lack of desirable information.

The objectives of Islamic accounting - avoidance of doubts and consequently to ensure fairness between all relevant parties and equitable transfer and distribution transfer and distribution of property rights and wealth.

CONCLUSION

MANY THANKS FOR YOUR ATTENTION

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