The Concept of Accounting in Islam: A Management Perspective

Abstract

Almighty Allah created jinn and human beings for His worship, but it does not mean that man will sit idle and reject working to earn legally and leave indulging without doing any business activities. Although earning of money is not the final goal of an individual in this world, Almighty Allah said:

﴿وَرَهْبَانِيَّةً ابْتَدَعُوهَا مَا كَتَبْنَاهَا عَلَيْهِمْ﴾[i]

"And they themselves invented the monkery; we did not ordain it for them."

Islam encourages the safekeeping of money, and its investment in the best and most efficient means. Similarly, Islam provided rules and regulations for managing money in a legal business and prohibited it’s misspent, giving it in the form of interest, gambling, bribery, or to eat money of others in illegal methods i.e. stealing and gharar etc.

Record keeping of business transactions is the main tool in ensuring profit or loss distribution among the partners without any dispute. Similarly, the success and existence of all forms of Islamic Finances like Musharika, Mudaraba, and Istisnaetc., are totally based on proper recording of business transactions which is the job of accounting. Moreover, accounting assists in the real management of assets including money, where wastage is avoided because in accounting all transactions spread over the lifetime of firm(s) are recorded. Likewise, journalized (recorded) transactions are posted to respective ledgers and summarized into financial statements for the calculation of profit or loss which are further distributed among the partners (owners) rules and regulations.

From an Islamic perspective, the income distributed by a firm among owners must be legal and Sharia-compliant. Now there are questions:

1. What is the concept of accounting in Islam?
2. What are the contributions of Muslims to this subject?

• What are the developmental and evolutionary procedures of Accounting?

In Surat Al Baqra(Al-Madaaniverse)Almighty Allah recommended writing of credit business transactions in documents (i.e. when payment is related with to a future date or if the cash is made now and delivery is made on some future date). In this verse, there are some indications that profession or occupation of writing business dealings is an obligatory order, Islam care welfare of human beings because in the glorious Quran it is the longest verse which is about public transactions not about prayers, keeping fast, hajj, or other pure worship. This is one verse from which we can derive that writing of transactions and keeping of witnesses is mandatory. Diligent religious scholars elicit regulation regarding business and record keeping from other verses. We will mention some of these.