الیوم اکملت لکم دینکم و اتممت
علیکم نعمتی و رضیت لکم الاسلام دینا۔
Human being have different function in his daily life some are related with his
private life some are concerned worshipe and some are realted with business and
his economically life. Islam also guiding his followers in business line like
others parts of life. Let’s see what is accounting and its standerds and what
issues in currently standerds of accounting and what says Islam about that.
1. Introduction
1.1 what is accounting
“Accounting is an information science used to collect, classifies, and
manipulates financial data for organizations and individuals”۔
In orginaztion some activities relating with production sector and some with
financing sectors the accounting science main function is record daily basis
transection and helping the organization in evaluating their performance.
In accounting them organization collecting different information and then
classiyng these all are in different catogories.
Accounting also helps the organization and investors in taking decision in
future.
2. Standerds of accounting
Around the world there are different princples and rules which using to mantain
daily transections in sequence. The most famouse and generly accepted accounting
princples and systems are GAAP .IAS, IFRS,but some countries using their own
accounting princples like china, France and others eourpian countries. GAAP
general accepted accounting system is more using then others beacuse to it widly
and easy rules and regulations.
Generally accepted accounting principles (GAAP) refer to the standard framework
of guidelines for financial accounting used in any given jurisdiction; generally
known as accounting standards or standard accounting practice. These include the
standards, conventions, and rules that accountants follow in recording and
summarizing and in the preparation of financial statements.
3. Issues in accounting
Although Financial Reports are generally assumed as genuine, correct and free
from biasness but still their basic assumptions are varied among the financial
engineers and financial experts. How much financial reports and statements base
on the economic reality of the organizations they represent is a matter highly
controversial among the experts. Some unexpected corporations take part in
financial market race and some strongly well established organizations declared
they bankrupt due to which economically and financially markets collapse. This
is all about due to improper financial reporting by these companies and there is
no strict check on these organizations if an organization is held responsible
for controlled financially reporting in the marker there hundred thousand
interpretations of the financial rules that allow them to financially represent
themselves as they want.
3.1 Standard Accounting issue
To maintain the two accounting standards is core issue in financial reporting.
Organizations are free to choose one of the standard accounting IAS or GAP or
both. If one standard is followed then no difficult but where both standards are
followed that makes the case difficult to understand.
3.2 Inventory Management Issue
Inventory can be managed by two methods that are last in First out (LIFO) and
First in First out (FIFO). If in financial Reporting one standard either LIFO or
FIF is followed then no matter it is easy to understand but if both are followed
in preparing the Financial Reporting then it brings a lot of difference in
financial position of an organization.
3.2 Entry of Assets
How assets are represented in the financial report. If they are entered against
their book value then it makes no difference but if they are entered per their
market value then it makes the financial position of an organization quite
different. Same is the case of current assets and fixed assets if both are
separated then its ok but fixed assets are showed as current assets then it will
enhance the financial position of the company.
4. Importanc of accounting in business
Organizations often need a way to keep score when conducting business
operations. Accounting usually fits this need because it allows companies to
create financial reports that can be compared with other companies or an
industry standard. Business owners and managers also use accounting to review
the efficiency of operations. This information may help owners and managers make
business decisions and improve the company’s profitability.
Accounting is also called business language because affective communication
helps owners and hareholder in decision and information about business
sitiuation and evaluation.
5. Accounting in Islam
First we going to clear about that Islam is not business religion and cant
discussed in Islam accounting in detail. Yes we can say in Islam explian general
rules and regulation about every part of life. In Quran majeed and in Hadees
discussed different stories and Ahkam about many avents and about others. The
Muslim juerists and mujtahedeen outed many rules and regulation for simmiler
evants. These rules and regulation called in Fiqh القوعد الشرعیہ. On the basis
of these rules they are outing ahkam for new avent and problems.
Whatever but Islam also discuss about the accounting need and importance of it.
6. Accounting in Quran
We know that accounting also including book keeping and rcording daily and
important transections. The Quran exploring the importanc of transections
recording in following
يَا أَيُّهَا الَّذِينَ آمَنُواْ إِذَا تَدَايَنتُم بِدَيْنٍ إِلَى أَجَلٍ
مُّسَمًّى فَاكْتُبُوهُ وَلْيَكْتُب بَّيْنَكُمْ كَاتِبٌ بِالْعَدْلِ وَلاَ يَأْبَ
كَاتِبٌ أَنْ يَكْتُبَ كَمَا عَلَّمَهُ اللّهُ فَلْيَكْتُبْ وَلْيُمْلِلِ الَّذِي
عَلَيْهِ الْحَقُّ وَلْيَتَّقِ اللّهَ رَبَّهُ وَلاَ يَبْخَسْ مِنْهُ شَيْئًا فَإن
كَانَ الَّذِي عَلَيْهِ الْحَقُّ سَفِيهًا أَوْ ضَعِيفًا أَوْ لاَ يَسْتَطِيعُ أَن
يُمِلَّ هُوَ فَلْيُمْلِلْ وَلِيُّهُ بِالْعَدْلِ وَاسْتَشْهِدُواْ شَهِيدَيْنِ من
رِّجَالِكُمْ فَإِن لَّمْ يَكُونَا رَجُلَيْنِ فَرَجُلٌ وَامْرَأَتَانِ مِمَّن
تَرْضَوْنَ مِنَ الشُّهَدَاء أَن تَضِلَّ إْحْدَاهُمَا فَتُذَكِّرَ إِحْدَاهُمَا
الأُخْرَى وَلاَ يَأْبَ الشُّهَدَاء إِذَا مَا دُعُواْ وَلاَ تَسْأَمُوْاْ أَن
تَكْتُبُوْهُ صَغِيرًا أَو كَبِيرًا إِلَى أَجَلِهِ ذَلِكُمْ أَقْسَطُ عِندَ اللّهِ
وَأَقْومُ لِلشَّهَادَةِ وَأَدْنَى أَلاَّ تَرْتَابُواْ إِلاَّ أَن تَكُونَ
تِجَارَةً حَاضِرَةً تُدِيرُونَهَا بَيْنَكُمْ فَلَيْسَ عَلَيْكُمْ جُنَاحٌ أَلاَّ
تَكْتُبُوهَا وَأَشْهِدُوْاْ إِذَا تَبَايَعْتُمْ وَلاَ يُضَآرَّ كَاتِبٌ وَلاَ
شَهِيدٌ وَإِن تَفْعَلُواْ فَإِنَّهُ فُسُوقٌ بِكُمْ وَاتَّقُواْ اللّهَ
وَيُعَلِّمُكُمُ اللّهُ وَاللّهُ بِكُلِّ شَيْءٍ عَلِيمٌ
6.1 Translation
O you who believe! When you contract a debt for a fixed period, write it down.
Let a scribe write it down in justice between you. Let not the scribe refuses to
write as Allah has taught him, so let him write. Let him (the debtor) who incurs
the liability dictate, and he must fear Allah, his Lord, and diminish not
anything of what he owes. But if the debtor is of poor understanding, or weak,
or is unable himself to dictate, then let his guardian dictate in justice. And
get two witnesses out of your own men. And if there are not two men (available),
then a man and two women, such as you agree for witnesses, so that if one of
them (two women) errs, the other can remind her. And the witnesses should not
refuse when they are called on (for evidence). You should not become weary to
write it (your contract), whether it be small or big, for its fixed term, that
is more just with Allah; more solid as evidence, and more convenient to prevent
doubts among yourselves, save when it is a present trade which you carry out on
the spot among yourselves, then there is no sin on you if you do not write it
down. But take witnesses whenever you make a commercial contract. Let neither
scribe nor witness suffer any harm, but if you do (such harm); it would be
wickedness in you. So be afraid of Allah; and Allah teaches you. And Allah is
the All-Knower of each and everything.
6.3 Accounting in Ahhadees
Also Muhammad SAW cleared that the book keeping، recording is good for relation
between humans and also for business.
Hazrat Muhammad SAW said.
“تعاونوا کالاخوان و تبایعوا کالاجنبی” (concept narration)
“Help each others like brother but for profit like strangures”.
Because the human being mostly thinking nagative. For example an person sell to
some one who is reltive of seller but he cant charge its price so he will be
expecting that in next time if purchase or deal in any thing it will be free of
cost. So amigan if another did not what the firs one may be thinking? Very clear
clash will be accure between them. So for safe future Muhammad SAW prevents and
avoids to do like that.
In other place Muhammad SAW said.
اللہ تعالی اس وقت شرکاہ کے درمیان رہتا ہے جب تک دونوں آپس میں خیرخواہ ہو۔ (بالمفھوم)
We know that the partnetship is most using mode of finance and mostly business
activities accures due to partnership.
In Hadees mubaraka said if they are acting and doing business with honesty they
will be making profit and will be recieving Barakah from Allah but if they
decieve each other or hide real profit from another then the Barakah will be
rise between both. It also tell us that the reality is most important part of
accounting because the just accounting shows the reality of business financially
sitiaution.
Charicristics of financial reports in Islam
Financial reports are on the basis of daily recording information. Financial
report shows the financial position and worth of organization for specific time
for which made financial report. How its posiable that the accountants force
toward good work and prevent them from fraud. There are two methods which are
useing in this case. Strict rules and spretualy motivation GAAP and IAS are
standerd which are using for regulating accounting procedgers but they have not
any way to motivate their employees. Islam is one and one religion which is
movitivating their followers. Let’s see what Islam saying about reporting.
Guidness of islam about ground reality
How your financial reports will be showing ground reality about organization?
Islam saying that does not
decive or fraud or misleading toward any thing. Do not say lie. Do not show over
estimate and other all thing harm huminaty.
Says Muhammad SAW
التاجر الامین والصدیق مع النبیین یوم القیامۃ۔
السدق ینجی والکذب یھلک
من خدع فھو لیس منا
لا تاکلوا اموالکم بینکم بالباطل
There are more Ahadees but its enough for good Muslim
ISLAM ALONG WITH ACCOUNTING
The actual religion regarding Islam has been launched throughout Makkah1 inside
the calendar year 610 Any. N. [Abu Addahab, 2002, r. 649] with the great
time-saver of the Quran to the Prophet Mohammad, peacefulness possibly be upon
them. only two In those days Arabs inside the Arabian peninsula normally, as
well as throughout Makkah specifically, pursued the tribal lifetime seen as
intervals regarding struggle between a variety of tribes. Tribes cant be found
at the mercy of any kind of traditional or published concept except the
principles of the head of the group. Substantial change took place with the
business of the Islamic point out throughout 622 Any. N. throughout Al-Madienah
Al-Munaw'warah3 if your basic principle regarding brotherhood has been released.
This specific needed that all Muslims act as inlaws without regard for you to
nation regarding source, race, terminology, color, cultural class or any factor
splitting humankind. This specific basic principle has been the muse regarding
social harmonization the type of that embraced Islam. Muslims denounced
retribution, helped the other fiscally as well as socially in spite of their own
historic variations. They will realized Islam being a complete code regarding
psychic as well as materials lifetime. They will commenced the learning, design
as well as program regarding the thing that was discovered inside the Quran. The
latest point out dominated because of the Quran come about to replace the tribal
nations and also the a variety of tribal principles. The actual Quran offered
guidance on social as well as commercial teachings. Examples of the social
teachings will be the principles regarding matrimony as well as gift of money.
Examples of commercial teachings will be the principles regarding long term
contract, fund, enterprise, zakat4 as well as honourable principles regarding
conducting enterprise as well as composing contracts.
The particular improvement involving information technology inside the Islamic
express has been religiously motivated and for this imposition involving zakat
inside the 12 months two H (624 The. Debbie. ). Sales seems to be include
initiated while using the business in the Dewans for the recording involving
Baitul Mal (public treasury) income and bills. The complete night out in the
very first request involving information technology systems inside the Islamic
express can be unknown, but it seems that these kinds of systems had been very
first noted by Al-Khawarizmy within 365 H (976 The. Debbie. ). The particular
information technology systems had been organized to help echo the type of
assignments set up from the Islamic express within conformity using its faith
based commitments. Most of these assignments integrated manufacturing,
agricultural, fiscal, housing and support assignments. The particular
information technology systems composed a set of guides and recording
procedures. Some of these procedures had been of an common characteristics and
given to all information technology systems and some had been prescribed
specifically for a particular information technology process. Mentionened above
previously mentioned the individual keeping the guides within these kinds of
various systems has been termed Al-Kateb13 (bookkeeper/accountant).
The intention of information technology systems has been to make sure liability,
accomplish choice creating generally, enable the evaluate involving accomplished
assignments. Although systems had been opened up pertaining to authorities
requirements, chances are that will some had been implemerited by private
business people so as to measure revenue within conformity while using the
required faith based requirement of zakat. It is also very likely that this
successful request involving information technology systems by governing bodies
marketed the ownership involving similar procedures between private business
people specially when considering zakat.
Procdure of accounting in Muslim society
Lasheen [1973, pp. 163-165] noted some of the common recording procedures
implemented after the 2nd century H (8th century A.D.). Examples of recording
procedures developed and applied by government authorities and individual
entrepreneurs in the Islamic state are as follows:
1. Transactions were to be recorded immediately when they occurred.
2. Transactions were to be classified according to their nature. This required
similar and homogeneous transactions to be classified under one account and
recorded as such.
3. Receipts were to be recorded on the right hand side of the page and sources
of receipts were to be identified and disclosed.17
4. Payments were to be recorded and sufficiently explained on the left hand side
of the page.
5. Recorded transactions were to be carefully explained.
6. No space was to be left between transactions. If a space was left for any
reason, a line had to be drawn across the space. This line was called Attarkeen.
7. Corrections to recorded transactions by overwriting or deletion were
prohibited. If Al-Kateb (the accountant/bookkeeper) had mistakenly overstated
the amount, he was obliged to pay the difference to the Dewan. If an expense was
omitted, Al-Kateb was required to pay the shortfall in cash even if it could
subsequently be proven that the expense did occur.
8. When the account was closed, a specific sign was to be placed in the books to
reflect the closure of the account.
9. All similar transactions recorded in the preliminary book were to be posted
to the specialized books maintained for that type transaction.
10. The posting of similar transactions was to be performed by persons
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 monthly and/or yearly report was to be prepared. This report had to be
detailed and provide sufficient information to determine, for example, incoming
crops, where they came from and how they were distributed.
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.
Conclusion
This work is basically about the accounting systems in early Islam and
contribution of ethics from Islam. In this short topic i try to summaries all
rules and regualtion which intruduced by Islam. Last words that this work is not
efficient to meet the expectations of readers and has wide scope for more
contribution