1. INTRODUCTION TO THE ACCOUNTING FRAMEWORK AND PRINCIPLES FOR ISLAMIC FINA NCIAL INSTITUTIONS O ye who believe!

When ye deal with each other in transactions involving future obligations in a fixed period of time, reduce them to writing; let a scribe wri te down faithfully as between the parties; let not the scribe refuse to write; as Allah has taught him, so let him write ... With the conviction that the recording of financial transactions is a divine com mandment, the field of study known as Islamic accounting was created. The conventional and Islamic accounting Conventional accounting; the identification, recording, classification, interpreting and communicating of economic events to permit users to make informed economic decisions who se ultimate purpose is to efficiently allocate scarce resources available to their most efficient (and profitable) use. Islamic accounting; Islamic accounting can be defined as the accounting process which provides appropriate information (not necessarily limited to financial data) to stakehol ders of an entity which will enable them to ensure that the entity is cont inuously operating within the bounds of the Islamic Sharia and delivering on its socioeconomic objectives. Framework and objectives of Islamic accounting Objective 1. To provide a fair basis for the calculation of zakah. 2. Avoid disputes among members of the through provide a fair basis for sha ring of profits, wealth transfers and full disclosure of activities and values. 3. Promote and ensure only Islamically permitted economic activities are ca rried out by the business and ensure the quest for profits by the business does not infringe societys right (e.g. for a clean environment, fair employment practi ces, contribution to the well-being of the community etc.)

The Differences between Islamic & Conventional Accounting Objectives Conventional accounting aims to permit informed decisions whose ultimate purpose is to efficiently allocate scarce resources available to their most efficient. Islamic accounting hopes to enable users to ensure that Islamic organizations ab ide by the principles of the Shariah in its dealings. Type of information Conventional accounting concentrates on identifying economics events and transac tions. Islamic accounting must identify socio-economic and religious events and transac tions. Valuation Conventional accounting mainly uses historic cost (or lower) to measure and valu es assets and liabilities. From an Islamic point of view, at least for the purpose of computation of Zakah, current valuation is obligatory. Users Conventional accounting seems to be serving an elite group of financiers market players and banks and other financial institutions.

 Islamic accounting serves the whole gamut of stakeholders (society as a whole ca n make corporations accountable for their actions and ensure they comply with Sh ariah principles).