The Differences Between Conventional and Islamic Accounting

3364 Words Nov 25th, 2012 14 Pages
THE DIFFERENCES BETWEEN CONVENTIONAL AND ISLAMIC ACCOUNTING

ABSTRACT

The concern of this project paper is to explore the differences between Islamic accounting and its conventional counterpart. The distinctions need to be addressed as both accounting is presently thought of many people as synonymous. There is danger for such kind of perception because the basic building blocks for respective accounting are worlds apart. As for professional accountants who have been taught on the idea for accounting to be ‘objective’ and value-free, the idea for attaching a religion may seems to be embarrassing and unprofessional. However, with the resurgence of Islam globally, the awareness for the need of Islamic accounting arises. Islamic accounting as
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In so doing, how IFIs’ financial statements are to be made comparable? And when accountants of the firms encountered difficulties in regards to complex transactions, they will eventually resort to conventional accounting treatment because of lack of knowledge in Shariah.

Therefore, this project paper intends to highlight and address the important distinctions between both conventional and Islamic accounting which is presently thought of many people as synonymous. There is danger for such kind of perception because the basic building blocks for respective accounting are worlds apart. Further, such blind acceptance and adoption of conventional accounting in Islamic organisations would lead to socio-economic behaviour inconsistent with the specific Islamic objectives, the attainment of which these institutions were set up for in the first place.

2.0 Religion, economy and accounting

When the conventional and Islamic accounting are compared, first and foremost, we have to look upon the root of modern accounting principles. Some years back, European and communist blocks adopted different set of accounting practice. In communist countries, there is lack of profit motive. Thus, profit and loss account and balance sheet doesn’t make sense in that economic system. This is why accounting profession never developed in Communist countries. Only
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