On Jan 1, 2023, ABC Islamic Bank entered into a Salam contract with a farmer to buy
Question:
On Jan 1, 2023, ABC Islamic Bank entered into a Salam contract with a farmer to buy 3 tons of wheat at USD 2,000 per ton to be delivered on Jun 30, 2023. The bank paid USD 6,000 at the date of entering the agreement and also formed a Parallel Salam contract with another client on Jan 10, 2023, to sell the wheat at USD 2,200 per ton. Payment under the Parallel Salam was received on Jan 15, 2023. ABC Islamic Bank received the commodity on June 30, 2023 and sold it to its client as per the Parallel Salam contract on Jul 3, 2023. What accounting entry will the bank pass at the time of selling the commodity under the Parallel Salam contract.
a. Dr. Parallel Salam (Liability) 6,000; Cr. Salam Inventory (Asset) 6,000.
b. Dr. Parallel Salam (Liability) 6,600; Cr. Salam Inventory (Asset) 6,000, Profit on Parallel Salam (IS) 600.
c. Dr. Salam Inventory (Asset) 6,000; Cr. Salam Financing (Asset) 6,000
d. Dr. Parallel Salam (Liability) 6,600; Cr. Salam Inventory (Asset) 6,600
Step by Step Answer:
Financial Reporting For Islamic Financial Institutions Accounting Standards Interpretation And Application
ISBN: 9781032464022
1st Edition
Authors: Abdul Rauf Mahar, Ayesha Bhatti, Muhammad Junaid Ashraf, Asfand Zubair Malik