Which of the following is the correct entry on receipt of instalments of year 1, including recognition of profit?

Jordan Islamic Bank gave murabaha financing to Ahmad to purchase a house that cost the bank 200,000 dinars over a 10-year period. The markup was a constant rate of return of 10% per annum. The instalments are to be paid equally over the 10 years. The bank recognises profit equally over the period. Ahmad paid the instalments regularly for the first 4 years and at the end of the fifth year he redeemed the financing. Jordan Islamic Bank agreed to give Ahmad 80% of the unearned deferred profit at the end of year 5, after taking the full profit for year 5.

Transcribed Image Text:

a. Dr Cash 40,000 Dr Deferred Profit 30,000 b. Dr Cash 40,000 Dr Deferred Profit 20,000 c. Dr Cash 40,000 Dr Profit and Loss 20,000 d. Dr Murabaha Financing 40,000 Dr Profit and Loss 20,000 Cr Murabaha Financing 40,000 Cr Profit and Loss 30,000 Cr Murabaha Financing 40,000 Cr Profit and Loss 20,000 Cr Murabaha Financing 40,000 Cr Deferred Profit 20,000 Cr Cash 40,000 Cr Deferred Profit 20,000