AN ANALYSIS ON ACCOUNTING ASSUMPTIONS AND PRINCIPLES FROM ISLAMIC SHARIAH PERSPECTIVE

Muhsina Aktar

Abstract


Accounting is a systematic process of recording, reporting, and analysis of financial transactions of a business organization. Accounting assumptions and principles are indispensable for Islamic financial institutions, thus making it imperative to assess their compatibility with Islamic law and principles. These principles are deduced from the sources of Islamic jurisprudence and from traditions as far they do not oppose the rules of the Islamic jurisprudence. Some of these principles may be similar to those applied in the contemporary accounting, but they have evidences from the Islamic juridical literatures.

The main purpose of this paper is to adapt the conventional approach to the study of accounting assumptions and principles to Islamic ideals in an effort of achieving the way of value justification in its practicality in which it could be applied. This research uses a normative-deductive approach to develop an Islamic accounting theory which suggests that anything is permissible unless it is prohibited clearly by the Shari’ah. This paper basically reviews the compatibility of conventional accounting with Islamic law and principle based on the data collected from various secondary sources. It includes a general review of accounting postulates and principles, and considers it in the light of Islamic shariah whether they are acceptable. This study suggests that Islamic banks should be more conscious to maintain Islamic Shariah preparing their financial statement through following these suggestive principles of what the study reveals. The paper also observes some limitations in both theoretical and empirical fields of orientation in terms of applying Islamic accounting which demands more research based study.


Keywords


Accounting assumption, Principles, Islamic Shariah.

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