CAEA 3224 - Accounting Theory and Practice
Lecturer: Dr. Norhayah Binti Zulkifli
Group Name: Gentlemen (Group 7)
Lim Sin Pei
Loh Yung Hao
Abu Saleh Ponir
Accounting is an important economic tool reflecting the interests and viewpoints of many
parties. Islamic societies need an accounting system that suits the ideology and values of Muslims,
to assist them in meeting their religious obligations. However, conventional accounting which is
inconsistent with the values and principles of Islam, is found to dominate accounting practice and
even in some of the Islamic countries. Thus, in this assignment, we would like to convey our
understanding on Islamic Accounting by discussing about both Conventional and Islamic Accounting.
Overview of Islamic Business Practices
First and foremost, let’s start with an overview of Islamic business practices. Islam
emphasises that humans should work and engage in production as they believe route to economic
achievement is from hard work but not from the inheritance of wealth. Next, Islam prioritises
distribution and moderation. Over-consumption and luxurious spending will be criticized while
mechanisms such as zakat and fard kefaya (temporary tax levied on the rich) are introduced to
encourage the practice of helping those in need. In addition, Islam focuses on social responsibility
whereby the welfare of the community is prioritised over individual rights. Mankind is prohibited to
earn their living by exploiting others. Business principles such as fair dealing and honesty should be
Five Islamic Financing Principles
There are five Islamic financing principles set in order to align with Islamic rules and norms.
First, Riba. It is considered the most far reaching and controversial aspect of Islamic economics.
From the conventional accounting...