Questions and Answers of Principles Of Islamic Accounting

Classify the following balance sheet items into assets, liabilities, and owners’ equity: ITEMS Cash Equipment Accounts payable Land Accounts receivable Common stock Building Notes payable Cash
Draw the general format of a balance sheet.
Use the following information from the financial statement of Datco to prepare the current assets section of the balance sheet: Accounts receivable Prepaid insurance Cash Supplies Short-term
Use the following information from the financial statement of Dugaz to prepare a classified balance sheet for the year ended December 31, 2019. Accounts payable 24,300 Building not currently used
The following items are included in the financial statement of Ducab for the year ended December 31, 2019. Prepare an income statement for the year ended December 31, 2019. Cost of goods sold
The following items are included in the financial statement of Rafco for 2019:Instructionsa. Compute the net profit for the year.b. What is the retained earnings figure that would appear on the
Classfiy the following items into Revenue and Expenses ITEMS REVENUE EXPENSES Sales Salaries Rent Insurance Utilities Cost of goods sold Service revenue Depreciation
Which of the following statement(s) is (are) TRUE?I. Sukuk are debt obligations due from the issuer to the investors.II. Sukuk are trust certificates.III. Sale of sukuk is basically the sale of a
Which of the following is (are) TRUE about an asset-based sukuk?I. It is when sukuk holders own a share of a specific tangible asset of the business.II. It is when sukuk holders will not have
Which of the following is NOT a characteristic of an asset-backed sukuk?a. Sukuk holders own a share of a specific tangible asset.b. Sukuk holders will not have recourse to the originator in case of
Under AAOIFI, at the end of an accounting period, available for sale sukuk will be valued at its fair value. The unrealised gains or losses from the remeasurement will be recogniseda. in the
Under IFRS, at the end of an accounting period, held-for-trading sukuk will be valued at its fair value. The unrealised gains or losses from the remeasurement will be recogniseda. in the operating
Define sukuk.
Why are sukuk becoming an increasingly important source of financing for companies? Discuss.
What are the differences between sukuk and bonds?
Mr Alex Lim, your neighbor who works in a conventional bank, wants to know what is meant by asset-backed and asset-based sukuk. According to him, a well-known Sharia scholar has always maintained
There are various types of sukuk structures. List and explain four of these.
The process of structuring sukuk requires a basic knowledge of the major Islamic finance products such as mudaraba, musharaka, ijarah, murabaha, and istisna. Discuss.
LBJ Enterprise, a Malaysian-based company, requires $150 million for its expansion project in Indonesia. At its recent board meeting, the chairman proposed that the funds should be raised through
Using the information in Question 1, and on the basis of AAOIFI’s standard on investments, you are required to provide (for each of the 5 years) the following:a. The accounting entries in the
EXE Company purchased ijarah sukuk with a face value of $1,000 amounting to RM1 million on March 1, 2019, and classified it as ‘$1 million held for trading’. On December 31, 2019, the sukuk was
Which of the following is not a zakat beneficiary? I. The wayfarer II. The poor III. The needy IV. The soldiers V. The slavesa. IV and Vb. IV onlyc. V onlyd. All are zakat beneficiaries.
Companies are obliged to pay zakat if they fulfil any of the following conditions.I. If the law is passed requiring the companies to pay zakat II. If they have not paid tax III. If the articles of
AAOIFI suggests various methods to determine zakat. They include the following:I. Net invested funds method II. Net income method III. Net working capital method IV. Net assets methoda. I, II, III,
Which of the following statements are TRUE?I. Equity investments that are held for trading are liable for zakat.II. Wages payable are not liable for zakat.III. Dividends received and receivable are
Which of the following statements are TRUE?I. Zakat is treated as an expense if the managing director so decides.II. Zakat is treated as an expense if the annual general meeting makes this its
The zakat rate on wealth based on the solar year isa. 2.5575%b. 2.7555%c. 2.5577%d. 2.5775%
What is the zakat rate on wealth based on the lunar year?a. 2.500%b. 2.550%c. 2.5700%d. 2.7700%
Zakat is payable only on ‘growing’ capital. Growing capital isa. a fixed asset that can be expanded.b. the realised gains on fixed assets.c. the realised and unrealised gains on fixed assets.d.
Growing capital will be equal to net working capitala. when there is no long-term debt financing any current assets.b. when there is no short-term debt financing any current assets.c. when there is
Which of the following statements are TRUE?I. The rate of zakat varies depending on the category of wealth.II. The rate of zakat is fixed at 2.5% irrespective of the category of wealth.III. Only
Discuss the limitations of conventional financial statements when computing zakat.
What are the two methods of computing zakat, and how do these differ?
Some scholars have suggested that zakat can be used as a tool for poverty eradication. Discuss.
The following is the statement of financial position for MNC Ltd as at December 31, 2018.Notes to the account:1. This includes raw materials of $71,000 and work-in-progress of $29,000.2. This
The following table shows the statement of financial position for Jims Shams Company as a June 30, 2020.Additional Information at the end of the year:1.A total of $400,000 value of held-for-trading
Which of the following systems of law are not religious based?a. Hindu family lawb. Canon lawc. Shariad. Roman law
The legal system practiced currently in Turkey is mainly based ona. Sharia as codified in the Majallah.b. common law of England.c. Continental European law.d. Canon law.
The following are Islamic legal schools of thought except:a. Shafi.b. Mazhabi.c. Maliki.d. Hanafi.
What is the difference between Sharia and fiqh?a. Sharia is based on the Quran, while fiqh is based on Hadith.b. Sharia consists of legal rules and fiqh consists of legal principles.c. Sharia
The components of Sharia include the following, except:a. Aqidah/Ibadah.b. Aqeeqah.c. Muamalat.d. Akhlaq.
The Muamalat component of the Sharia includes:a. Commercial transactions only.b. Commercial and marriage contracts.c. Commercial, family, charitable, and hereditary laws.d. Commercial, marriage, and
The following are the pillars of the Islamic contracts except:a. Legal capacity of contracting parties.b. Offer and acceptance.c. Suitable, known, and existing subject matter, with some exceptions
Which one of the following contracts is imperfect (fasid) and NOT batil?a. A trustee of an orphan’s property sells it at a small discount to his relatives.b. Ahmad rents out his property to a
Which of the following is NOT a condition of the subject matter of the Islamic contract of sale?a. The subject matter must exist at the time of contracting except for salam and istisna contracts.b.
Which of the following makes mudaraba different from a musharaka contract?I. Capital contribution II. Loss sharing III. Profits shared in pre-agreed ratio IV. Management participationa. I, II, and
What are the two systems of secular law in the world?
Is there any other religious law in the world besides the Sharia? What are these, and where are they practiced?
Explain the differences between Sharia and fiqh.
Categorize the Sharia into the main components and give a brief explanation of each.
What do you think are the main objectives of Islamic contracts? Derive these from the pillars and rules of Islamic contracts.
What is the difference between Qard and Dayn?
What are the pillars of Islamic contracts. State and explain briefly.
Explain the prohibited elements in Islamic contracts.
What elements make an Islamic contract defective or invalid besides the prohibited elements in question 8?Question 8Which of the following is NOT a condition of the subject matter of the Islamic
Differentiate between mudaraba, musharaka, and murabaha.
Search the website of an Islamic bank in Malaysia and one bank in Bahrain and list the deposit and financing products. What are the underlying contracts in these products? Are the underlying
Categorize the following contracts as valid, invalid, or imperfect.a. An Islamic bank provides financing to build a Masjid.b. Rajoo Islamic bank provides interest to its depositors.c. Ali signs up
Restructuring the mudaraba contract: Hussain enters into a mudaraba agreement with Hasan, who will be the mudharib. The terms of the agreement are as follows:a. Hasan gets $4,000 monthly salary,
Which of the following is correct, when ibra is recorded in the accounts?a. It shall be debited to the Murabaha Financing account.b. It shall be treated as a liability.c. It shall be taken out of the
Which of the following is incorrect?a. The contract of murabaha requires that the markup (profit) must be recognised equally over the murabaha contract period.b. In murabaha financing, the selling
Identify the correct action of the islamic bank in the following case study: Mr. Bilal made a binding promise to an Islamic bank that he would buy a van from the latter through a murabaha
Which is the most common contract for personal financing being employed by Islamic banks?a. Murabahab. Musharakac. Tawarruqd. Mudharaba
Identify the correct journal entries at the time of contracting the murabaha contract under the following scenario: An Islamic bank enters into a murabaha financing agreement for a plant at a cost
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
Which of the following is the correct extract of the balance sheet of Islamic Bank of Jordan at the end of the 2nd year after the second instalment is paid?a. Murabaha Financing 200,000b. Murabaha
Which of the following is the correct extract of the income statement of Islamic Bank of Jordan at the end of the 1st year?a. Profit/(loss) from Murabaha Financing (20,000)b. Profit/(loss) from
Which of the following shows the correct balance of Deferred Profit account of Islamic Bank of Jordan at the end of the 5th year after the payment of the 5th instalment but before redemption?a.
Which pair of the following figures shows the redemption amount(assume the instalments for the 5th year have been paid separately before redemption ) and the total profit taken in the 5th year?a.
What are the reasons for the failure for mudaraba and musharaka contracts to become mainstream in the Islamic financial services industry?
Suggest ideas to make mudharaba and musharaka contracts mainstream in the Islamic financial industry.
You were introduced to urboun (a nonrefundable deposit) in this chapter. Use Google to find the meaning of another deposit termed hamish al jiddiyah, which is refundable. Explain the difference
After referring to the Internet or other references to obtain knowledge of hamish jiddiya, draft and discuss the journal entries to account for a hamish jiddiyah deposit of $5,000 and its refund
Draw a diagram showing how a customer using tawarruq can place a deposit in a bank with a fixed return.
Do you think IFRS accounting standards are suitable for Islamic accounting, given that Islamic accounting has different social, religious, and economic objectives as opposed to the capitalist market
Research the Accounting and Auditing Organization and make a 10-minute presentation in class. Conduct a class discussion for 5 minutes after your presentation on whether AAOIFI should continue its
Explain the concept of time value of money. Search for references on the Islamic perspective on this concept and discuss why you agree or disagree with this concept.
Looking at the illustration in this chapter, discuss which accounting standard (IFRS or AAOIFI) is more beneficial to the customer if he wants to redeem his murabaha financing in the 5th year of an
Using the definition of assets, liability, and equity, explain in your words the logic of the accounting entries under AAOIFI for a simple murabaha transaction with deposit but without early
Wan Rosli places a tawarruq deposit with Maybank Islamic for a period of 8 years. The murabaha selling price of $10,000 to the bank is based on a return of 5% per annum compounded. Using the PV of $1
Othman al Habshi needs $50,000 for his son’s wedding. He decided to seek Islamic financing using tawarruq financing from Bank Islam of Yemen with a term of 10 years. If the bank uses a 7% compound
The Baghdad Islamic Bank sold on a murabaha basis a house to Imam Ghazali at a markup of 8% per annum constant rate of return to be paid over 10 years in equal annual instalments. The cost of the
Using the facts in E3, if the IFRS accounting recognition method is used, how much charity will Imam Ghazali be able to give? Explain the difference.
Using the data in the Comprehensive Illustration given in this chapter, record the entries in the following ledger accounts and close off the accounts each year until early redemption, under AAOIFI
___________________refers to God’s arrangement for directing things towards a perfect state.a. Adalahb. Tawhidc. Rubbubiyyahd. Shurad
The Quranic view of life divides man’s functions into:I. Khilafah II. Hablumminannas III. Hablumminallah IV. Tawhida. I, II, and IIIb. I and IIc. II and IIId. I, III, and IV
Why is a current value balance sheet important for an Islamic society?a. To indicate there is inflationb. To ensure that shareholders are not cheatedc. To calculate zakatd. For the auditors, as
Which of the following is not included in the GRI Framework on Sustainability?a. Labor practices and decent workb. Human rightsc. Product responsibilityd. Corporate governance
The three basic categories of information in the GRI Framework on Sustainability are:a. economic, human rights, and ethics.b. economic, environmental and corporate governance.c. economic,
There are various advantages in reporting CSR activities. Which of the following is not one of the advantages?a. Increased information for decision makingb. More accurate product costingc.
Product responsibility in the GRI Framework on Sustainability consists of various issues. Which of the following is (are) not part of product responsibility?I. Customer health and community II.
Which of the following statements is (are) true?I. Social performance indicators from an Islamic perspective should include congregational prayers.II. It is acceptable for Islamic business
Which of the following is (are) not part of the proposed CSR model from Islam’s perspective?I. Statement of zakat and charity funds II. Statement of qard funds III. Profile of directors IV. Amount
Which of the following statements is (are) true?I. From Islam’s perspective, the GRI framework is adequate to reflect on the social responsibility of the organisation.II. Zakat is emphasised in the
What are sustainability issues?
What is the Global Reporting Initiative? What are the types of information suggested by the GRI to be disclosed by companies?
There are various guidelines on sustainability that companies can use to report on CSR. Discuss.
It has been suggested that CSR from an Islamic perspective has a wider focus. Discuss.
What are the advantages of a value-added statement?
Some Muslim scholars have suggested that the value-added statement may support socioeconomic justice of Islam to a greater extent than the income statement. Discuss.

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