far600 - islamic article 1 (edit)
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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)
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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
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WERE
ADVANCED !!!
Accounting systemsdeveloped and practiced
in parts of the Muslim
World
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The role played by Indianaccountants in the
development of accounting
prior
to Pacioli’s Summa of1494
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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
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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)
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“Islam has the potential for
influencing :•The Structure
•Underlying Concepts
•The mechanisms
of accounting in Islamic world”
Hamid et al
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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.
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The development of accounting and other sciences in Muslim
society was initiated by the teachings of Islam
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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)
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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)
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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
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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)
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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.
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