The 2 Essential Elements for Disclosure in Islamic Accounting Social

The 2 essential elements for disclosure in islamic

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The 2 Essential Elements for Disclosure in Islamic Accounting Social Accountability Hesab or “account” in the root of accounting and the references in the Holy Quran are to account in its generic sense, relating to one’s obligation to “account” to God all matters pertaining to human endeavor for which every Muslim is accountable. All resources made available to individuals are made so in the form of a trust. Individuals are trustees for what they have been given by God in form of goods, property and less tangible assets. Every Muslim has an account with Allah, in which recorded all good and bad actions, an account which will continue until death, for Allah shows all people theirs accounts on their judgment day. In a business enterprise, both management and providers of capital are accountable for their actions both within and outside their firm. Accountability means accountability to the community (umma) or society at large. Thus, one of the main objectives of Islamic accounting is to provide information which discharges those involved in the firm from their accountability to the umma. Full Disclosure Financial information is relevant from an Islamic view only when it includes the attribute of “truth”- fair and accurate disclosure of the matters at hand. The purpose of accounting information is to serve the public interest, umma has right to know about the effects of the operations of the organization on its well being and to be advised within requirements of shari’a as to how this have been achieve. It relates to accountability to God through making information freely available. Truthful and relevant disclosure of information is important. There are responsibilities such as paying zakat, the calculation of which requires disclosure of worth of assets and liabilities in terms of religious obligation to help the poor. Full disclosure is necessary for predicting future obligations and assessing investment risk in Islamic partnership arrangements. The 5 financing principles in order to conform with Islamic rules and norms in investment behavior 2
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The absence of interest based financial transactions (Riba) The payment of riba and taking of interest as occurs in a conventional banking system is explicitly prohibited by Holy Quran. Islamic ban on riba , it means banned on all predetermined interest payable on a loan of any kind. Thus, investors must be compensated by other means (e.g. profit sharing and not ask for fixed return) Riba also seems to refer to any form of taking advantage of the poor and the ignorant.
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  • Spring '17
  • Dr.Amir

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