BWFS 3023: ISLAMIC ACCOUNTING GROUP ASSIGNMENT

1.0INTRODUCTION

The debating between the best practice either the Islamic accounting or conventional accounting

in the accounting line still being non-ending issue until today. Even in the Muslim countries such

as Malaysia, this country still not fully practice all parts of Islamic accounting guidelines which

was proved by the conducting of dual accounting system, Islamic accounting and conventional

accounting in the same time.

It’s reality of existing Islamic accounting and conventional accounting division practices

also caused by the formation of non-halal business such as prostitutions and pornography in a

one country at the same time mixed with the halal business activities, besides the lack of deep

understanding among the people about these two differences accounting and also caused by the

non-serious stressing by government to implement non dual accounting method in the Muslim

country.

As for common understanding, accounting is the process of measuring, processing and

communicating of financial information of business entity or it is also known as “the language of

business”. Refer to Abdul Rahim Bin Abdul Rahman (2010), “ the better you understand the

language, the better you can manage the financial aspect of business”. Accounting also basically

involved the quantitative and qualitative methods which used in economy to get the useful result

in business for the judgements and decision making by the economy users.

However, when refer to the Islamic accounting, mostly people especially the non-Muslim

community, they are actually was misunderstood by judging and assuming it’s concept was

duplicate from the conventional accounting. They assuming the Islamic accounting and

conventional accounting both are the same things with the different names. Moreover, in the real

scenario, it still have some Muslim, frustratedly, also in misconception by stated that Islamic

accounting only serve for Muslim, not allowed to non-Muslim.

According to this problems arise, it is important to highlight and explain the differences

between Islamic accounting and conventional accounting to show a lot of contradict aspects

among these two accounting practices. So, to differentiate, the deeply focus will be rely to the

source, aim, accountability and disclosure of these both accounting.

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BWFS 3023: ISLAMIC ACCOUNTING GROUP ASSIGNMENT

2.0SOURCES

To differentiate between these two accounting practices, firstly, a deeply look should be put on

the actual sources grounded by them. For Islamic accounting, it is the only accounting practice in

this world which made all accounting process guided from the religion sources. However, for the

conventional one, the development of this science only based to the human law besides deserting

some ethical value.

"And O my people, give full measure and weight in justice and do not deprive the people of their

due and do not commit abuse on the earth, spreading corruption.

"What remains (lawful) from Allah is best for you, if you would be believers. But I am not a

guardian over you.

Al - Quran (Surah Hud,verses 85-86)

“And I did not create the jinn and the mankind except to workship Me”

Al-Quran (Surah Adh-

Dhariyat:verse 56)

Based to the above verses in the Surah Hud and Surah Ad-Dhariat, the clarity of Allah

SWT commands was used as the argument in the Islamic accounting, so that all the accounting

users act fairly, justice and without break the law of Islam besides realize the duty of humankind

even in accounting line to be a vicegerent of Allah SWT.

However, for the conventional accounting, the law in this accounting only created based

to the human experience, knowledge and thinking. Richard Brown (2004) “The art of

numeration, or the method of counting, whether by words or signs or symbols goes back to the

dawn of intelligence among human beings, though it can hardly be said to begin with the

moment when one things can be distinguishable from another”. So, as the result, the system only

monopolized by the those who have big power and interest to control it until causing injustice

and exploitation in the field.

The conventional accounting which dominated by Christianity and Buddhism shown

clearly that they are not impose their religion prohibited such as immoral conducts or defraud in

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BWFS 3023: ISLAMIC ACCOUNTING GROUP ASSIGNMENT

delivery accounting information, and not put the real religion, ethical or right principal matter or

abstain it all in the accounting line as well.

So, the source of accounting was bringing a big impact to accounting conduct. If the

ground of accounting was rely purely to religion basis as Islam, the real welfare not only

achieved by a few people who empower and control the economy, but also share to all part of

person in the line.

3.0AIM

The third one is about their aim or objective. It is also important to determine of why the existing

and the functioning of these both accounting are different from each other. Basically, the

conventional accounting’s aim only to fulfill the interest of influential person in the field but for

Islamic accounting, it wide’s aim is more than that.

For Islamic accounting, all the activities were aim to get a blessing from Allah SWT. It is

also to achieve al- falah, which is not only limited in the in the world but also in the hereafter. To

make it possible, the accountant must ensure the accounting activity and process follow the

principal of Syariah which the information detail in accounting must show a clear and separately

with the prohibited earning and expenditures either in the business or government. Some part of

asset in business wil be used to pay the zakah to clean the shubhah items which found in

accounting information beside as an obligation toward Allah SWT.

In contrast, the conventional accounting objective only based to the certain part of the

individual interest. It may lead to the neglect and suppression on public welfare such as

permitting higher interest in loan to gain higher profit and stopped reporting the information of

subprime borrowers to protect the customers picked by other competitors which actually will

make the customer difficult to borrow from other institutions that he want.

So, as we seen, the Islamic accounting aim is preferable to be a best example and to be

followed in the real world rather than conventional accounting. Even the aim is to achieve higher

profit, it is impermissible to neglect the public interest.

4.0ACCOUNTABILITY

To differentiate the Islamic accounting and Conventional accounting, also can be see through

the accountability between both of them.

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BWFS 3023: ISLAMIC ACCOUNTING GROUP ASSIGNMENT

For the Islamic accounting, actually, the accountability is involve with the essential goal

in Islam because the belief is that resources are provided to an individual from God in the form

of trust. So, from this, everyone will be accountable for their action as a trustee to Allah s.w.t.

Futhermore, accountability also means the accountability to the community which is ummah or

society at large. This is because, in Islamic thoughts, individual or organizations are expected to

feel socially responsible for others in community especially for those who are needy people.

Meanwhile, for the conventional accounting, many of the accounting practices are most

control the resources that is absolutely do not seem to be relevant to the types of accountability

required under Shari’ah. Through this also, the accountability for conventional accounting, had

seek to address pattern of inequality and marginalization that are globally present and it

strategies aimed at challenging power resonate with poor people experiences. This will

absolutely violated the poor and needy people in the accounting and business.

So, from the explanation, the accountability for Islamic accounting is more to the action of

individual himself which is difference from Conventional accounting.

5.0 DISCLOSURE

Last but not least, the differences between the Islamic accounting and Conventional accounting

is disclosure that had been make by this two accounting, which can provide more deeply

information about both accounting.

For Islamic accounting, the term of disclosure actually has related with the concept social

accountability in Islam which is involved with the principle of full disclosure. This can be prove

when in the al- quran, which is in surah al- baqarah, verses 71, had stated about the meaning of

“relevance” that referred to the disclosure of all facts. Therefore, if the purpose of the accounting

information is to serve the public interest, and it also follows the Islamic context, then, the

community or the ummah has the right to know about the consequences of the operations in

organization on its well being and to be advised within the requirements of Shari’ah.

Meanwhile, for the conventional accounting, the disclosure is only emphasizes on users

requirement of information, which is mean only limited disclosure provision of information

subject will be provided for the public interest . According to this concept, all the information

relating to the organization should be disclosed completely in the financial statement without

any clarification from the accountants. Moreover, in the conventional accounting, many of the

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BWFS 3023: ISLAMIC ACCOUNTING GROUP ASSIGNMENT

disclosure in annual reports are manipulated to provide a favorable impact of business

operations.

So, through this, we can concluded that, the Islamic accounting disclosure relate with the

social accountability which is involved with the principle of full disclosure, which really

different with conventional accounting that is more to private sociability and limited disclosure.

6.0 OVERVIEW

Basically, there are many contradicts between Islamic accounting and conventional accounting

that should be understand by the users including the layman. As to educate the public and to give

the best explanation about the best accounting that should be applied, the government who is the

lawmaker should change the accounting education system by giving the emphasis about this two

types of accounting starting from school education besides aggressively applied only one type of

accounting, which is Islamic accounting in the economic system because of the wide advantages

to everyone.

7.0 CONCLUSION

So, regarding to the elaborations of differences between Islamic accounting and conventional

accounting in this assignment, it shown that Islamic accounting actually serve a wide and

comprehensive welfare to the accounting users rather than the conventional accounting which

contains injustice or desertion elements to some minor influential parties in the arena.

So, as a part of muamalah connection in Islam, Islamic accounting should be a way of

best accounting practice especially in the Islamic countries since the guidelines itself was parallel

with the government function which is to provide a public welfare which is not only in the

education and social scope but also in the economy.

The conventional accounting, even it is progressively profitable for some users while

conducting by mostly users in the world, should be remember that it methods still contains some

weakness because of human-made law in it conduct. Humankind was not prohibited to earn and

enjoy the wealth, but at the same time, any negative conduct in conventional accounting must be

varnished.

Finally, it is necessary to encourage the business organization to practice Islamic

accounting in their work as not only limited to Muslim, but also non-Muslim would willingly to

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BWFS 3023: ISLAMIC ACCOUNTING GROUP ASSIGNMENT

practice it. Islamic accounting also should not be seen as divisive but as the alternative to set the

actual ethical practicing to replace the disability of conventional accounting which only

benefiting one side of party in economy.

7.0 REFERENCES

Internet

The History of Accounting, retriviewed at 10.58pm, 14 April 2014, from

http://www.library.unisa.edu.au/about/exhibitions/historyacc.aspx

Accounting, retriviewed at 10.34pm, 16 April 2014, from http://en.wikipedia.org/wiki/Accounting

What is Objective of Islamic Accounting, retriviewed at 9.54pm,17 April 2014, from

http://wiki.answers.com/Q/What_is_objectives_of_Islamic_Accounting?#slide=33

Kabir Tahir Hamid, IBF 8211 Accounting for Islamic Financial Institutions, retrieved at 9.32 pm,

18 April 2014, from

http://www.academia.edu/2027832/IBF_8211_Accounting_for_Islamic_Financial_Institutions

Farhan Zaheer, Breaking New ground : Setting Misunderstanding Aside, Islamic Banking

Grow Rapidly, published in April 25, 2013, retriviewed at : 5.46pm, 20 April 2014, from

http://tribune.com.pk/story/540161/breaking-new-ground-setting-misunderstandings-aside-

islamic-banking-grows-rapidly/

Misconceptions About Islamic Finance, retriviewed at 5.49pm, 20 April 2014, from

http://www.inceif.org/islamic-finance/misconceptions/

Al -Quran, Surah Hud, chapter 11 verses 85-86, retriviewed at 10.45 pm, 3 Mei 2014, from

http://quran.com/11

Al-Quran, Surah Adh-Dhariyat, chapter 51, verse 56, retriviewed at 10.57 pm, 3 Mei 2014, from

http://quran.com/51

Book

1) David Crowther ( 2008 ) “Culture and Corporate Governance”, page 209- 210

2) Mohamed Ariff, Munawar Iqbal, Edward Elgar Publishing (Jan 1, 2011) “The

Foundations Of Islamic Banking : Theory, Practice and Education”, pages 91

3) Abdul Rahim Abdul Rahman (3rd Print 2012 )”An Introduction To Islamic

Accounting Theory and Practice”, CERT Publications Sdn. Bhd , page 4, 10 and 11

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4) Peter Newel and Joanna Wheler (August 7, 2006) “Rights, Resources and The

Politics of Accountability”, pages xiv- 4.

5) Robert Anthony Rayman ( January 26, 2013) “A Multi- Gear Strategy For Economic

Recovery” page 153.

6) Richard Brown (2004) “A History of Accounting and Accountants” Cosimo Books

Inc, New York, page 3

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