Islam is an Arabic word which means peace and submission to Allah. A follower of Islam is called a Muslim. Islam is a complete religion which has mentioned in Holy Koran, Al Maidah (5): 3 This day I have perfected your religion for you, completed My favour upon you, and have chosen for you Islam as your religion. Because of that Islam do not leave his followers alone to strive the life. Instead, Islam has tought his ummah every single acts and behaves, from the very little to huge problems.
Naturally, Allah has created everything in pairs and needing each other. Mu’amalah ‘amah is the way how human interacts between each other. Mu’amalah’ amah includes marriage and family, commercial transaction, punishment and so on. Muslims are not only required to be good in their relationship with Allah (Hablum Minnallah), but they are also must be good in horizontal accountability to human being (Hablum Minannas). Besides, all such behaves they have done will be accountability in the hereafter. The different between Muslim and non Muslim is Muslims believe there is the Day of Judgment, whilst non Muslims do not.
Transcendental accountability to God can be done easily by doing ‘amal sholeh. On the other hand, relationship with human being is the most difficult to do, because people are not the same. From person to another have their preferences, beliefs and wills. To make it much clearer, let have a look in banking system. People prefer to save their money in conventional bank, because they will get return (interest charge). Either Muslim or non Muslim, they are human kind that have preferences, interests, and wills. The thing make them different is only the level of their beliefs (iman).
However, commercial transaction is one of mu’amalah ‘amah which people always do in their daily life. This transaction includes trading, leasing, investment and etc. Islam has described perfectly about trading and prohibited riba. Riba or interest is prohibited because riba covers any return of money on money, whether the interest is fixed or floating, simple or compounded, and at whatever rate.
Allah mentioned in the holy Quran about the prohibition of riba. For instance, Al Baqarah (2) 278 -279 O ye who believe! Fear Allah, and give up what remains of your demand for usury if ye are indeed believers. If ye do it not, take notice of war from Allah and his Messenger but if ye present, ye shall have your capital sums: deal not unjustly, and ye shall not be dealt with unjustly.
Not only Quran has mentioned the prohibition of riba, but the Bible and the Torah also mentioned it. For example, in Bible Levitus (25): 35-37 (God said) if one of your countrymen becomes poor and is unable to support himself among you, help him as you would an alien or a temporary resident, so he can continue to live among you. Do not take interest of any kind from him, but fear your God, so that your countryman may continue to live among you. You must not lend him money at interest or sell him food at a profit.
In a nutshell, all of religions support the justice and fairness in trading or without riba. To illustrate that, in order to achieve the justice and fairness, Allah asked us to write down the contracts which related to future obligation. It is mentioned in verse Al Baqarah: 282 O ye believe! when ye deal with each other, in transactions involving future obligations in fixed period of time, reduce them to writing, let a scribe write down faithfully as between the parties.
In this case the proper complete recording the contract is an accounting. Accounting in Islamic perspective can be defined as the process of identifying, measuring and communicating economic and other relevant information inspired by Islamic worldview and ethics, and complies with Islamic law –in order to permit informed judgments and decisions by potential and expected users of information to enhance social welfare and seek mardhatillah (blessing of Allah).
At the same time, it is because accounting is an area of human activity which tends to be regarded by some of its practitioners as neutral and value free, a reporting function which requires the application of complex technical requirements but not moral involvement beyond adherence to a set of precepts in the form of an ethical code.
So, what about Islamic accounting, is there Islamic accounting or it is as same as accounting conventionally. A word of Islam already explained shortly in the beginning. Now, have a look at the similarities and differences between Islamic and conventional accounting must be better before showing the evidences which support the existence of Islamic accounting.
First of all, let examine the similarities between them. For example, either conventional or Islamic accounting, recognize bonds, but in Islamic model bonds are treated with special conditions which must complied by shariah. Islamic bonds are known as sukuk . The difference between sukuk and bond is bonds are guaranteed by issuer and sukuk are not and riba is not considered in sukuk. In term of using time period, Anglo-American and Islamic model use it. This due to time period is very crucial in recognition, measurement and disclosure matters.
On the other hand, there are differences between Anglo-American and Islamic models. Obviously, in the case of accounting ethics and legalistic orientation Islamic model stress on religious values because the law is used in Islamic model is based on shariah law. Whilst, conventional use common law. Not only that, but also Islamic model put in it Islamic ethics which does not exist in Anglo-American model like, fear God whenever people deal with each other and Islamic financial contract is required at least 2 truthful witnesses to check and ensure proper accountability the rights, obligations all the parties.
Generally, no differences between both of them, Islamic accounting uses the same double entry bookkeeping as conventional does. The thing make them different is Islamic accounting bears Islamic values in it. For example, as mentioned in verse Al Baqarah (2) 177 Allah defined that any aspects of life cannot be separated from Islamic values, tawhid which leads people to fear God in dealing with others. Once people fear God, they will record and deal with each other carefully because they are accountability in front of Allah in the hereafter.
Nevertheless, in order to know the existence of something, people need to go back to the history because, history tells us what the purpose and how life must to be. As a Muslim the holy Quran and the Hadith are two primary sources of Islamic law. Since the word “Islamic” hangs into accounting in this case, the evidence of existence of Islamic accounting will not far away from Islam as a religion, and the previous ummah (in the era of prophet Muhammad saw , Sahabah and Ttabi’in).
It is widely known that the holy Quran contains many sources which needed by his ummah. Regarding Islamic accounting, Quran has mentioned about another type of accounting which looks after the accountability of human behavior. As showed in verse Maryam (19) 93-95 Not one of the beings in the heavens and the earth but must come to (God) Most Gracious as a servant. He does take an account of them (all), and hath numbered them (all) exactly. And everyone of them will come to Him singly on the Day of Judgment. Meaning that, people have to be careful about what they intend to do and they have done in the past because they will be asked about them in yaum al hisab (The Day of Judgment ).This is a kind of another dimension of accounting record in Islam which another religions do not have. Another accounting record in the holy Quran is, as explained in verse al Qamar (54) 53 Every matter, small and great is on record.
The purpose of recording is to show the result later on as fairly and justice as possible. In Islam the angels of Allah Raqib and ‘Atid, keep recording humankind’s acts. Allah said in verse Anbiya’ (21) 47 We shall set up scales of justice for the Day of Judgment, so that not soul will be dealt with unjustly in the least, and if there be (no more than) the weight of mustard seed, we will bring it (to account): and enough are We take account. This reminds us about the judgment of Allah will be very just and fair later on in the hereafter which no one can deny it. Definitely, no one will be judged unfairly at that time, because there is no as perfect as Allah’s law in this world.
At the same time, recording something is making it as documentary. It will become a proof of all the actions that people have done in this world. Similarly to an accounting record which writing down everything happened, all the rights and obligations all parties. Besides, it will become a documentary to all parties which will remind them about the contracts. As Ali (RA) said indeed there is angels of Allah go down to the world every day to write down all the actions of bani Adam. And the aim recording also is to be a reliable reference of what happened in the past. This aim to make the one who be the subject of recording believe what he has done in the past, and without fail no one can deny it. Allah has explained it also in verse Yasin (36) 65 That day shall we set a seal on their mouths. But their hands will speak to Us, and their feet bear witness to all that they did.
Somehow, it has been said that Luca Pacioli, a math scientist, from Italy was the one who found the double entry keeping in 1494, 13th century. Actually, it cannot be denied also that an accounting subject is not something new in Muslim society. From 9th century to 15th there was a Muslim scholar, Qudamah bin Ja’far died in 918, has written a book about Kitabat Al Amwal in title Al Kharaj Wa San’atul Kitabah. This evidence shows us that at that time accounting was known in Islam and it proves the existence of an Islamic accounting.
In other words, even if Luca Pacioli is the one who established the double entry, 3 centuries earlier before he established it Muslim society already has established how to record the property (Kitabat Al Amwal). At that time Muslim society has grown steeply especially in era of prophet in all aspects, politics, administrations, financial, accounting and etc. Baitul mal was there and the simple function of baitul mal was to check and count sadaqah. For example, Huzaifah bin Yaman wrote and count zakat al mal of Zubair bin ‘Awam. It continued functionally until the era of the first caliph, Abu Bakr As Siddiq and second caliph, ‘Umar bin khattab. The nature of baitul mal since its established was generally in function. For instance, if there is a Muslim died and without leaving heir, baitul mal will inherit his wealth.
People were familiar with bai’ murabahah, mudarabah, ijarah. Of course, the contracts at that time were not as complicated as now. It can be seen in Mukhtasar Kitab Al Um Fi Fiqh As Syafi’I and Al Fatawa Al Kubro Al Fiqhiah Fi Mazhab Al Imam As Syafi’I, the writers explained about al ijarah, mudarabah, and bai murabahah. The student of Imam Ibn Hajz, Abd Qodir bin Ahmad bin ‘Ali died in 982 H, casted light upon those contracts. The facts above support an Islamic accounting is not a new matter. In other words, people are aware and use it as their reference in dealing with each other. Therefore, based on the evidences above I would like to say an Islamic accounting does exist.
Nowadays, Economic has grown dramatically, compared to the times of prophet. Undoubtedly, the situations and problems change from time to time. Mudarabah, bai’ murabahah, and ijarah are not as simple as before. In addition, accounting matter faces new problem, as the society has changed. Moreover, in order to deal with it people need to survive and address those obstacles of life.
As mentioned before about the similarities and the differences between Islamic and conventional accounting, the two different things cannot be mixed together, although they have similarities. For example in conventional model they use interest, whilst Islamic do not and both of them use bookkeeping double entry. Another example is Muslim and non-Muslim investors have a same goal on their investments which is to increase their wealth and get return on it.
In addition, the beginning toward Islamic accounting is when Islamic bank become much interested by people, especially Muslims. During the last two decades a number of Islamic banks have gone up. Nowadays, there are over 150 such institutions all over the world. They realized that the conventional accounting concepts and practices need to be standardized and redefined to meet their needs. The reason behind it is because financial statement is one of the way how stakeholders analyze and evaluate of financial institution.
At the same time, financial statement must be reliable, relevant and comparability between one institution to another. Thus In my opinion, we do really need Islamic accounting in order to make distinction between Islamic and conventional bank in their financial statements. This is due to the differences how they treat accounting product, for instance, Islamic leasing (ijarah) and conventional leasing. They are alike in case of leasing both of them are using leasing contract, but not the same, in term of bearing repairment cost in ijarah it is borne by lessor and in conventional leasing borne by lessee and other impermissible transactions like Gharar. Based on those reasons, I would say Islamic accounting is needed to fulfill such requirements.
Another reason why we need Islamic accounting is Islam encourages his follower to be balance between world and the hereafter. As mentioned in verse of Al Qasash (28)77: But seek, with the (wealth) which God has bestowed on thee, the Home of the Hereafter, nor forget thy portion in this world. It can be derived from this verse that people have to do everything in balance for their needs in this world and hereafter. Dealing with each other must be done and recorded properly in order to make it as fair and just as possible. As a result, a proper Islamic accounting is needed to meet their complementary.
Both of them have different objectives and they are pursued people to establish different way of recording. In addition, any working must have clear objective in order to assist people in implementing it and achieve precise goals. Similarly to Islamic financial accounting, it has objectives which will become his vision in its implications. For example, Islamic banks must comply with the principles of shariah in all their financial. While conventional do not. At the same time, the objectives of financial accounting for Islamic banks would achieve many benefits like the objectives will assist Islamic banks, in the absence of accepted accounting standard, in making choices among alternative accounting treatment.
Finally, zakat is one of issue that conventional does not have. The payment of zakah is one of the pillars of Islam. Theoretically zakat is levied on the net worth of accumulated wealth and it will be given for purpose, it is explained specifically in the Quran (9:60), basically to help the poor. In addition, the prohibition of interest, impermissible contracts like Gharar and Maysir in Islam also reflects the way how Islamic bank operates. Another two objectives of accounting information are based on upon inferred general requirements which will be referred to as social accountability and full disclosure.
In conclusion, Islam is a complete and comprehensive religion and pays more attention in his follower actions. As followers, the submission to Allah by following what has allowed and leaving the forbidden things is the main goal, receive blessing of Allah. Besides, people must implement shari’ah law in their actions especially when dealing with each other. In addition, Halal and Haram are clear and between them Mcbhatt which do not know the truth. Similarly to Islamic and conventional accounting they are alike but, not the same. Because of that people need proper accounting in order to fulfill their needs in Islamic banking fields. Wallahu a’lam
References
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