Accounting Theories
COMMON TEST
APRIL 2012
QUESTION 1 (a)
1. Private property
The power to change ownership, because bookkeeping is concerned with recording the facts about property and property rights.
2. Capital
Wealth productively employed, because otherwise commerce would be trivial and credit would not exist.
3. Commerce
The interchange of goods on a widespread level, because purely local trading in small volume would not create the sort of press of business needed to spur the creation of an organized system to replace the existing hodgepodge of record-keeping.
QUESTION 2 Islamic accounting can be defined as the “accounting process” which provides appropriates information (not necessarily limited to financial data) to stakeholders of entity which will enable them to ensure that the entity is continuously operating within Islamic Sharia’ ah while “conventional” accounting can be defined to be the identification, recording, classification, interpreting and communications economic events to permit users to make informed decisions. From this, it can be seen that both Islamic and conventional accounting is in the business of providing information. The differences lie in the following the objective of providing information, the type of information, including how it measured, valued, recorded and communicated, and the users of the information. Conventional accounting is aims to permit informed decisions whose ultimate purpose is to efficiently allocate scare resources available to their most efficient (and profitable) uses by providing information efficiency in the market. Islamic Accounting, on the other hand, hopes to enable users to ensure that Islamic organizations abide by the principles of the Shari’ah or Islamic Law in its dealings and enables the assessment of whether the objectives of the organizations are being met. The type of information which Islamic accounting identifies, measures is different. Conventional accounting concentrates of identifying
APRIL 2012
QUESTION 1 (a)
1. Private property
The power to change ownership, because bookkeeping is concerned with recording the facts about property and property rights.
2. Capital
Wealth productively employed, because otherwise commerce would be trivial and credit would not exist.
3. Commerce
The interchange of goods on a widespread level, because purely local trading in small volume would not create the sort of press of business needed to spur the creation of an organized system to replace the existing hodgepodge of record-keeping.
QUESTION 2 Islamic accounting can be defined as the “accounting process” which provides appropriates information (not necessarily limited to financial data) to stakeholders of entity which will enable them to ensure that the entity is continuously operating within Islamic Sharia’ ah while “conventional” accounting can be defined to be the identification, recording, classification, interpreting and communications economic events to permit users to make informed decisions. From this, it can be seen that both Islamic and conventional accounting is in the business of providing information. The differences lie in the following the objective of providing information, the type of information, including how it measured, valued, recorded and communicated, and the users of the information. Conventional accounting is aims to permit informed decisions whose ultimate purpose is to efficiently allocate scare resources available to their most efficient (and profitable) uses by providing information efficiency in the market. Islamic Accounting, on the other hand, hopes to enable users to ensure that Islamic organizations abide by the principles of the Shari’ah or Islamic Law in its dealings and enables the assessment of whether the objectives of the organizations are being met. The type of information which Islamic accounting identifies, measures is different. Conventional accounting concentrates of identifying