FAR 600

ARTICLE 1 : ACCOUNTING SYSTEMS AND RECORDING PROCEDURES IN THE EARLY ISLAMIC STATE
ROS ARIZA ABD ARIS SHAZLIANA CHE HASHIM NUR SHAIDATUL AZREEN AHMAD SHAHARIBUDIN WAN NOR ADILAH MOHD NAZRI NOR DIYANA MOHD IBRAHIM MERICAN 2011714333 2011900615 2011369375 2011937305 2011381029

Lieber suggest that Italian traders obtained their knowledge of sophisticated business method from Muslim counterparts

The development of accounting and other sciences in Muslim society was initiated by the teachings of Islam

The life before Islam were founded

Worship idols Bribery & Riba Tribes

Islam was founded in Makkah Principles of brotherhood was introduced All Muslims act as brothers Al-Quran as guidance

The introduction and organization of zakat in 624 A.D

Encouraged accounting for the purpose of zakat calculation and payment This development was enhanced with the formal introduction of accounting books, concept and procedures during the time of second Caliph, Omar Bin Al-kattab

Quran requires the writing and recording of debts and business transactions. The development and practice of accounting in Muslim society thus reflected Islam as a comprehensive code of spiritual and material life.

The term Al-Amel, Mubasher, Al-kateb or Kateb Al-Mal were the common titles for accounting/bookkeeper and account clerk. Used interchangeably in different parts of the islamic state.

Al-khawarismi used the term Muhasabah for the function of accounting and Muhaseb for Accountant. Al-khawarismi consists of: Types of records maintained in the Dewans & the book use to record amount Technical terms that were common in Muslim society regarding the duties of secretary Accounting system that were implemented during the 4th Century hijriah His book were considered the most influential work of its time

Al- Mazenderany was one of the early Muslim scholars who documented the practice of accounting in Muslim society.

INTRODUCTION
Structured to reflect type of projects undertaken by Islamic state in compliance with their religious obligation.

Objectives:
The person that maintaining the books was called Al-Kateb

To ensure accountability Facilitate decision making Permit the evaluation of completed projects

TREASURY ACCOUNTING

STABLE ACCOUNTING (ACCOUNTING FOR LIVESTOCK)

CONSTRUCTION ACCOUNTING

SHEEP GRAZING ACCOUNTING

TYPES OF ACCOUNTING SYSTEMS

RICE FARM ACCOUNTING (AGRICULTURAL ACCOUNTING)

MINT ACCOUNTING (CURRENCY ACCOUNTING)

WAREHOUSE ACCOUNTING

1. STABLE ACCOUNTING (ACCOUNTING

FOR LIVESTOCK)
E.g: > Food for camels > Horses > Animal purchases

Under the supervision of a stable manager

Required that relevant transaction and events be record as they occurred.

Apply in the private sector : i) Consumption or transportation ii) System record and measure annual profit to calculate payment of zakat.

Reflects the importance of livestock assets to individual and the state.

2. CONSTRUCTION ACCOUNTING
To account for construction projects undertaken by government.

The maintenance of a separate journal for each construction site. The recording of all relevant transaction and events from the commencement of project to its completion. The specifications of individual projects be listed at the front of the journal, followed by terms of construction. Transaction were recorded under the supervision of the person-in-charge the project (architect) Example items recorded in journal: material received, wages paid to carpenters Surplus/deficit at the completion of the project would be accounted for and disclosed, any discrepancies be explained.

3. RICE FARM ACCOUNTING

(AGRICULTURAL ACCOUNTING)

A non monetary system because required: Recording of quantities of rice received and disbursed. Specification of the fields that produced the rice. The bookkeeper had sole responsibility for both recording and keeping custody of the inventory.

This system is designed for: State-owned rice farms Purpose of accounting for the rice received and distributed as zakat in kind rather than in monetary form.

4. WAREHOUSE ACCOUNTING
Design to account for the states purchase of suppliers Direct supervision of a person known as trustworthy
Required the detailed recording

Mandatory to investigate the causes & to question the store man about the stock

Stock count be conducted at the end of financial year & results compare with stock recorded

At least 2 classified books were used

5. MINT ACCOUNTING
Primary producer of a country coin currency The mint has the consent of the government to manufacture coins to be used as legal tender Mint also responsible for the distribution of the currency protection of the mint gold & silver assets

5. MINT ACCOUNTING
Required immediate conversion of gold & silver received by the mint authority to bullion or coins Do not allow raw materials (gold/silver) & finished products (bullion/coins) to be held on premises for any length of time for security reason

5. MINT ACCOUNTING
MINT required 3 specialized account

Recording inventory

Recording revenue

Recording expenses

Revenue of the mint calculated either 5% of the cost of gold or silver

6. SHEEP GRAZING ACCOUNTING

Form of farm accounting Initiated & implemented by gov authorities in the Islamic state Used by private entrepreneurs to measure the profit & loss for the purpose of zakat Animals given to the grazier or shepherd were recorded in bokk designed for the purpose Revenue received either in cash or in kind was also recorded Proper classification & adequate disclosure was also a feature of farm accounting as it required the separate classification of male sheep, female sheep, goats and their offspring

7. TREASURY ACCOUNTING
Used by government Required daily recording of all treasury receipt & payment This systems would have included inventory needed by government and/or Sultan such as gold, silver, medicine, etc Required the provision of separate columns for cash transaction Non-cash transaction classified according to : Nature Colour Other specification

7. TREASURY ACCOUNTING
- Record inflow of cash & goods on right side of journal - Outflow on left side - Separate page for each item ARABIAN - Journal function as both journal & ledger METHOD - Majority bookeeper ARAB - Two separate book (inflow/outflow) PERSIAN - Not required itemizations of inflow & outflow of cash & goods

RECORDING PROCEDURES IN MUSLIM SOCIETY

The development and implementation of accounting systems in the Islamic state was supported by mandatory recording procedures The procedures enabled officials to adequately monitor activities and discover any deficit or surplus in the state treasury arising through imbalanced books.

2 cases reflecting the effectiveness of these internal controls: Deficit of one Derham in the Baitul Mal Deficit resulted from unrecorded expenses.

Examples of recording procedures developed and applied by gov. authorities & individual entrepreneurs in the Islamic state

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Transactions were to be recorded immediately when they occurred.

Transactions were to be classified according to their nature.

Receipts were to be recorded on the right hand side of the page and sources of receipts were to be identified and disclosed.

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Payments were to be recorded and sufficiently explained on the left hand side of the page.

Recorded transactions were to be carefully explained.

No space was to be left between transactions. If a space was left for any reason, a line (attarkeen) had to be drawn across the space.
Corrections to recorded transactions by overwriting or deletion were to be prohibited. If mistakenly overstated the amount, Al-Kateb was obliged to pay the difference to the Dewan.

When the account was closed, a specific sign was to be placed in the books to reflect the closure of the account All similar transactions recorded in the preliminary book were to be posted to the specialized books maintained for that type of transaction The posting of similar transactions was to be performed by persons independent from those who recorded the transactions in the daily and other books

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The balance (Al-Hasel), had to be extracted.

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A monthly and/or yearly report was to be prepared

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At the end of each financial year, a report was to be prepared

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

Various accounting systems were developed & implemented in Muslim society

Zakat was the major factor contributing to the development of accounting systems, books, recording and control procedures
Includes other features; monthly & yearly statement, budgeting, auditing and internal control