Economics and Business

Course Outline: Financial Accounting, Principles of Accounting or Basic Accounting

Mr. Md. Abdullahil Kafi

Accounting is not only a tool but also a highly developed information system. It is not now a clerk’s job, it is rather the job of a highly professional person. Accounting developed with the growth of human civilization. It has developed from the scratch of keeping note to the current level of human resource accounting.

It is an information system that identifies, records, and communicates the economic events of an organization to interested users.

  1. In identification process, accounting selects the economic activities relevant to a particular organization for recording purpose.
  2. In Recording process information is recorded in a systematic, chronological manner. In recording, economic events are also classified and summarized. 
  3. Financial information is communicated through accounting reports to users for decision making, the most common accounting reports are called financial statements.

The meaning of accounting in Islamic perspective does not conflict with the sprit of Islam, rather Islam reinforce the meaning of accounting. Accounting is way of attaining a business discipline and Islam emphasizes to do it. I think the following three inputs can be can be given in existing accounting syllabus of the universities.

  • Development of accounting in Islam

The significant development of keeping records of transactions in Islam was the establishment of Baitul Maal where Zakaat, Usr and other incomes of Islamic state  deposited and distributed. A strict record of these incomes from different sources were maintained. The warden of the Baitul Maal had to maintain these records with adequate details for observations and examinations. Over the period of time Islamic administration developed and institution for accounting and auditing in the name of Hisba. Hisba means checking the accounts.

  • Quraanic code of Accounting

Development of modern accounting started through introducing double entry system by Luca Pacioli in 1494, an Italian Renaissance mathematician, in his text Suma de Arithmetica, Geomaterica, Proportion et Proportionlita. But Allah taught accounting very earlier of human civilization. Allah (SWT) commands “O you who believe! When you contract a debt for a fixed period, write it down. Let a scribe write it down in justice between you. Let not the scribe refuse to write as Allâh has taught him, so let him write. Let him (the debtor) who incurs the liability dictate, and he must fear Allâh, his Lord, and diminish not anything of what he owes. But if the debtor is of poor understanding, or weak, or is unable himself to dictate, then let his guardian dictate in justice.”(2:282).

  • Islamic Ethics in Accounting

Organization sometimes maintains three books one for internal use one for tax authority and the other for shareholders. Islam as well as accounting does not support.

Reference :
1. Accounting Ethics, Principles: An Islamic perspective, by Zohurul Islam.

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