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First documented by Al-Khawarizmy in 365H Seven specific accounting systems were practiced in the Islamic state by Al-Khawarizmy. Development of accounting was practiced by Indian accountant. (Lall Nigam-1986) The practices were derived from Arabs where there were similarity in Arab & Indian language. (Scorgie)
Double-entry accounting was practiced in Near East before Pacioli era. Accounting record was outlined by Luca Pacioli in 1494. A feature of Paciolis Summa was the use of Arabic numbers. Italian trader obtained knowledge of business method from Muslim counterparts. (Alfred Lieber1968)
Definition Objective and Characteristic of Islamic Accounting Fundamental Islamic Value to Business Activities
Definition
Consideration of Shariah in accounting method and process To ensure the organizations operations carried out under Shariah.
The use of conventional accounting based on secular philosophical values may be inconsistent with Islamic values and norms. Conventional accounting is made to meet the socioeconomic objectives of secular capitalist economic, not Islamic economic system. Lead to inconsistent or deviant behavior of Muslim users, which is called Homeo Economicus. Rational to develop Islamic accounting - to have an ethical accounting system that also measures social, environmental and religious performance, not merely the profit.
CONVENTIONAL
SECULAR
ISLAMIC
RELIGIOUS
MODERN COMMERCIAL
LIMITED DISCLOSURE
Financial
Mirza & Baydoun (2000) - Islamic accounting is likely to use historical cost and market selling price Zakat is calculated based on current price.
Khan (1994) - is pessimistic about this principle especially on firms disclosing negative information about themselves