An asset is anything that is capable of generating positive cash flows or other economic benefits in the future either by itself or in combination with other assets which the financial institution has acquired the right to as a result of past transactions or events. Although the capacity of the financial institution to control benefits is usually the result of legal rights, an item may nonetheless satisfy the definition of an asset even there is no legal control. Based on the above statement which of the following is true (A) The above statement reflects the definition of an asset in Islamic accounting (B) The above statement contradicts the definition of an asset in Islamic accounting (C)The above statement reflects the definition of forward sale contracts with an underlying asset in Islamic Accounting (D) The above statement contradicts the definition of forward sale contracts with an underlying asset in Islamic accounting
1.An asset is anything that is capable of generating positive
As per Islamic Accounting, an asset should be something that can produce a positive flow of cash within an organization and also is capable of producing some economic benefits in the nearby future. This can be made possible either by an asset itself or by the combination of these. But in case of the forward contracts, the underlying asset is the one which is sell and obtained by the respective contractors.
Islamic Law has introduced the concept of Gharar which comes into picture when the party fails to fulfill its obligation of delivering the underlying asset. There are legal controls concerning these contracts without which a contract cannot be binding legally.
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