far600 - islamic article 1 (edit)

8/12/2019 Far600 - Islamic Article 1 (Edit)

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Accounting systems andrecording procedures practicedin Muslim Society commenced

before the invention of the

Arabic numerals (early 9th Century A.D by Al-Khawarizmy)

in response to religiousrequirements (zakat) in the year

2 Hijrah (624 A.D)



i. To further ADVANCE our

accounting history knowledge

ii. To explore the work of earlyMuslims scholars

Zakat and expansion in the revenuesand expenditure

Structure of business

The religion



WERE

ADVANCED !!!

Accounting systemsdeveloped and practiced

in parts of the Muslim

World



The role played by Indianaccountants in the

development of accounting

prior

to Pacioli’s Summa of1494



The earliest treatise on accounting is generally thought to be PaSummar of 1494. The Bahi-khata is a double-entry system

bookkeeping that predates the ‘Italian’ method by many centurieexistence in India prior to the Greek and Roman empires suggesIndian traders took it with them to Italy, and from there the double

system spread through Europe. The Bahi-khata is described andouble-entry principles explained.

References:

http://onlinelibrary.wiley.com/doi/10.1111/j.1467-6281.1986.tb00132.x/abstract



Solas&

Otar

The rudiments of double entry accounting wpracticed in the Near East (India etc)

The principles were developed independentthe accounting practices used in the west (Mworld)



“Islam has the potential for

influencing :•The Structure

•Underlying Concepts

•The mechanisms

of accounting in Islamic world”

Hamid et al



Book-keeping arose asa direct result of theestablishment ofpartnerships on a largescale

SievekingItalian traders obtainetheir knowledge ofsophisticated businesmethods from theirMuslims counterparts

Lieber

The first European whotranslated algebra fromthe writings of the

Arabians is supposed tohave written the firsttreatise on bookkeeping

Heaps Bookkeeping would first bepracticed by the first considerablemerchants, and as these werethe Arabians.



The development of accounting and other sciences in Muslim

society was initiated by the teachings of Islam



610 A.D• Islam was founded in Makkah

622 A.D

• Establishment of the Islamic state (Al-Madienah Al-Munaw’warah)• Principle of brotherhood (foundation for social harmonization)

• Commenced the study, interpretation and application of what was revealed in(social & commercial teachings)



624 A.D

(2 H)

• Introduction and imposition of Zakat• It encourage the development of accounting

634 – 644

A.D

• Ruler : Omar Al-Kattab

• Formal introduction of accounting books, concepts and procedures

768 A.D

• Developments and practices were documented by a number of early Mu(printed and handwritten books)



976 A.D

• The title of ‘Al-Kateb’ being used • Work of Al-Khawarizmy, Mafateih Al-Uloom (Keys of Sciences) appeared

9th century

• Invention of Arabic numerals by Al-Khawarizmy

12 A.D – 14 A.D

• Crusade War



Types of recordsmaintained in the

Dewans

Describe theaccounting systems

that were practiced i10th century

The books used torecord accounts

Duties of secretary

Mafatieh Al-Uloom (Keysof Science)



1363 A.D

• Al-Mazendarany documented ‘the practice of accounting in Muslim s

• Risalah Falakiyyah Kitabus Siyakat (Arabic) or Risale-I Felekiyya (T

• Describe accounting systems used in Islamic state in greater detail tKhawarizmy

1494 A.D

• Luca Pacioli’s Summa de Arithmetica been written



ACCOUNTINGSYSTEMS

DEVELOPEDIN MUSLIMSOCIETY

Imposition ofZakat

Establishmentof Dewans

Documentedby Al-

Khawarizmy

Reflect thetype ofprojects

undertaken bythe Islamic

State

Bookkeeper/accountant iscalled as Al-

Kateb

Income

statementoriented



Stable Accounting (Accounting for Livestock)

• The system was supervised by a stable manager

• Transactions and events be recorded as they occurred

• Example: Animals – (purchased, sold, died), caretaker wage

for camels etc.• Importance: Livestock assets to individuals and state

Private Sector : - Consumption - Transportation - Payment of zakat (for entreprene



Construction Accounting

• To account for construction projects undertaken by governme

• Required the maintenance of separate journal, recording of rtransactions and events for each construction site

• Transactions were recorded by PIC – architect

• Items recorded in journals; materials received, wages paid tocarpenters and etc.

• Importance: - Internal control and progress of construction si - Surplus/deficit in any accounts wonoted



Rice Farm Accounting (Agricultural Accounting)

• Non monetary system – required the recording of quantities of rireceived and disbursed and the specification of the fields thatproduced the rice.

• Did not indicate a segregation of duties between recording and

managing the inventory.• Designed for state-owned rice farms or for the purpose of

accounting for the rice received and distributed as zakat in kindrather than in monetary form.

• Required recording of receipts and issues of grain in physical teand without reference to money measurement.



Warehouse Accounting

• To account for state’s purchase of supplies

• Required the detailed recording of the type of goods receivand the source of delivery in books prepared for the purpos

• Not stated the recording of goods received and issued wamonetary terms only, or in physical and monetary terms,though the latter appears most likely in practice.

• The store man – personally liable for any short fall betweenbook and actual inventory



Mint Accounting (Currency Accounting)

• Designed and implemented in the Islamic state before the 14 th century

• Required the immediate conversion of gold and silver received by theauthority into bullion and coins to the person in charge

• Required the use of 3 specialized journals – inventory, revenue andexpenses

• Purchases and wages were examples of costs incurred by the mintauthority

• Mandatory to record the terms and conditions of the services providedthe mint authority in the expenses journal



Sheep Grazing Accounting

• Initiate and implement by government authorities in the Islamstate and its use by private entrepreneurs to measure the por losses for the purpose of zakat is likely.

• Items recorded; animals given to grazier or shepherd, revenreceived either in cash or kind

• Revenue in kind received by the grazier included animals ansheep products.

• Losses include those due to natural disasters such as droug



Treasury Accounting

• Used by government – required daily recording of all treasuryreceipts and payments.

• Monetary and non monetary measurements – recording treasur

receipts and disbursements were in cash and kind.• Required the provision of separate columns for cash transactionsNon cash transactions - classified according to nature, color andother specifications.

• Encompassed 2 methods of recording – arabian method and permethod



Examples of recording procedures developed and applied by government author

individual entrepreneurs in the Islamic state are as follows :

2. Transaction were to be

classified according to their

nature. This required similar

and homogeneous

transactions to be classifiedunder one account and

recorded as such

1. Transaction to be

recorded immediately when

they occurred

3. Receipts were to be

recorded on the right hand

side of the page and

sources of receipts were

to be identified anddisclosed.

4. P

reco

expla

s



5. Recorded

transactions were

to be carefully

explained.

6. No space was to be

left betweentransaction. If a space

was left, a line had to

be drawn across thespace. This line was

called Attarkeen

7. Corrections torecorded transactions

by overwriting or

deleting were

prohibited to Al-Kateb

(theaccountant/bookkeepe

r)

8. When

was close

sign was

in the boo

the closac



9. All similar transactions

recorded in the preliminary

book were to be posted to

the specialized books

maintained for that that

type transaction.

10. The posting ofsimilar transactions was

to be performed by

person independent from

those who recorded the

transactions in the daily

and other books.

11. The balance, called

Al-Hasel (the difference

between two amounts,

had to be extracted.

12. A m

rep

prepa

had to

pro

in



13. At the end of each financial

year, a report was to be prepared

by Al-Kateb detailing all goods

and funds under his custody and

management.

14. Annual reports prepared by

Al-Kateb were to be reviewed

(audited) and compared with

prior year reports and with

records maintained in the main

Dewan.

far600 - islamic article 1 (edit)

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