Accounting Assignment: Monetary Assets, Ijarah and Profit Sharing

This assignment solution delves into key accounting concepts, starting with the definition of monetary assets and their characteristics, including examples like bank deposits and trade receivables. It then explores the Islamic finance term 'Ijarah,' explaining it as a form of leasing. The assignment further analyzes inheritance laws from Surah Nisa, discussing the distribution of assets based on family relationships and the concept of Musharakah, particularly Shirakat Ul Melk Bill Jabar. It also examines Shirkat Ul Aqd, including Shirakat ul Amwal, Shirakat ul Amal, and Shirakat Ul Wujooh. The solution includes problem-solving scenarios involving investments by Islamic Financial Institutions (IFI) in Musharakah contracts, calculating capital loss and net asset values. Additionally, the assignment presents profit-sharing calculations based on different ratios in a company setup, providing insights into the distribution of profits between partners.

Accounting:
1- Monetary Assets:
These can be defined as the assets whose worth does not change with dollars. It always has a
responsibility to give a specific amount of the currency amount. Shortly, they are nonmotile. However,
one capacity to purchase them varies with time due to changing prices of good and services. It is
important to know that these monetary assets neither become outdated nor acquire more value.
Examples:
 Bank deposit
 Lease investment
 Other receivables meant for settlement through cash
 Investment in debt capital market instruments
 Trade receivables.
2- Ijarah:
This term is purely Islamic and used in the Islamic banking specifically.it is widely used in Islamic
Jurisprudence and it meant “giving something on rent”. It can be explained in simple terms as giving of
something or a consumable asset by the owner to the other person for a certain period of time on a
certain amount either annually or monthly as the case may be.
Analysis:
“….but if they are more than two, they share a third….” (Al-Nisa:12)
these are the lines taken from the Surah Nisa Ayat no 12. First the complete ayat is
“In what your wives leave, your share is a half, if they leave no child; but if they leave a child, ye get a
fourth; after payment of legacies and debts. In what you leave, their share is a fourth, if you leave no
child; but if you leave a child, they get an eighth; after payment of legacies and debts. If the man or
woman whose inheritance is in question, has left neither ascendants nor descendants, but has left a
brother or a sister, each one of the two gets a sixth; but if more than two, they share in a third”
In this ayat the laws of inheritance have been discussed, and proper way has been told in which it is told
that if your wife leaves something, then in her assets your share is half in case if you have not any
children. But if there are off springs present, you share will be fourth. If a male person died, then her
wife will have the fourth share as well if there is no child. But if children are present then your wife will
get the eighth part of your assets after payment of all the debts and necessary payments. After
discussing the first right heirs of the inheritance, it has been told that if a woman or man who have
assets and died without leaving any descendants meaning offspring either daughter or son, or

ascendants, both parents or either of them then the 1/6th part of wealth will go to either a brother or a
sister if any of them present. But if both are present, then they asset will be divided in them, each of
them will one third of the asset. Here in the last, it is given the concept of MUSHARAKAH, in which it is
asked for the two siblings to share the property of their deceased brother or the sister. This type of
Musharakah is called Shirakat UL Melk Bill Jabar
In the second ayat of Surah Al-Sad 24, Allah has given commandments of the mutual contract, how the
type of the contract is and how the profit and benefit can be shared. Such type of Musharakah is called
“Shirkat Ul Aqd”, which are further divided into three types
 Shirakat ul Amwal
 Shirakat ul Amal
 Shirakat ul Wujooh
1- Shirakat ul Amwal: it is about, when all the two or more partners invest money in the business.
It is further divided into two sub branches,
a- Shirakat ul Inan:
In this the partners add up money unequally as well as their efforts. In this the profit is
distributed as per agreement and the loss is distributed according to the investment.
b- Shirakat ul Mufwada: in this all the partners invest equal amount and the profit is shared
equally as well as loss.
2- Shirakat ul Amal: it is about-as the name indicating-the services. In this, two persons are equally
aware of the technological knowledge and take on business and get profit. Their profit will be
divided equally between the two.
3- Shirakat Ul Wujooh: in this the partners have not cash. They buy the products or goods on
credit. Then they made business with them. After paying all the dues and credit, the profit is
equally shared between them.
PART 3: Problem Solving
Investment by IFI in two years project having worth= 700,000
capital provided on Musharakah contract= 70%
the project value declined at first year = 40%
capital loss= 700,000 x 40 / 100 = 280, 000 rs

Impairment loss = 700,000 x 70 /100 = 490,000
= 490,000 x 0.4 = 196,000 Rs
Net value of the Asset if carried on the next year= 700,000 – 280,000 = 420,000Rs
 In subsequent period, performance is measured based on the outstanding capital. On the other
hand, if the project is abandoned leading to the termination of the Musharakah contract, the IFI
claims should be only,
Capital on Musharakah x net value of the asset = 70% x 420,000
= 0.7 x 420,000
= 294,000 Rs
 A and B established a company, if profit after first year was USD 900,000 find below
Total profit= 900,000 USD
a- If the ratio between A and B is 75: 25 then profit will be
The profit of A= 900,000 x 75 / 100
= 675,000 USD
The profit of B = 900,000 – 675,000
= 225,000 USD
b- If the ratio is between A and B is 50: 50
The profit of A = 900,000 x 50 /100
= 450,000 USD
The profit of B= 900,000 – 450,000
= 450,000 USD
c- If the ratio between A and B is 40: 60
The profit of A = 900,000 x 40 / 100
= 360,000 USD

The profit of B = 900,000 – 360, 000
= 540,000 USD
 If the benchmark profit is 1,000,000 USD then
If benchmark profit= 1,000,000 USD
d- If the ratio between A and B is 75: 25 then profit will be
The profit of A= 1,000,000 x 75 / 100
= 750,000 USD
The profit of B = 1,000,000 – 750,000
= 250,000 USD
e- If the ratio is between A and B is 50: 50
The profit of A = 1,000,000 x 50 /100
= 500,000 USD
The profit of B= 1,000,000 – 450,000
= 500,000 USD
f- If the ratio between A and B is 40: 60
The profit of A = 1,000,000 x 40 / 100
= 400,000 USD
The profit of B = 900,000 – 360, 000
= 600,000 USD