Mudarabah Mushtarakah

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KULIYYAH OF ECONOMICS AND MANAGEMENT SCINECES | ISLAMIC ACCOUNTING AND FINANCE | MASTER OF SCIENCE (FINANCE) | ACC6810 |

ACCOUNTING IMPLICATIONS OF JIONT MUDARABAH (MUDARABAH MUSHTARAKAH)

SUBMITTED TO: Prof. Dr. Abdul Rahim Abdul Rahman

Basheer Hussein Altarturi G1111009

Semester 1
2012
Contents 1 Introduction 3 2 Mudarabah in a Traditional Viewpoint 4 2.1 Traditional Mudarabah; an Overview 4 2.2 Business Issues in the Traditional Mudarabah 5 3 Introduction to the Joint Mudarabah (Mudarabah Mushtarakah) 6 3.1 The Joint Mudarabah (Mudarabah Mushtarakah) Concept 6 3.2 Main Features of the Mudarib Mushtarak 8 3.2.1 The Conditions Issue 8 3.2.2 Capital Guarantee Issue 8 4 Accounting Issues in Mudarabah Contract 9 4.1 Profit Distribution 9 4.2 Reporting and Presentation 12 4.3 Agency Problem 13 5 Conclusion 14 6 Bibliography 16

Introduction
Islamic banking and finance (IBF) emerged as an alternative from conventional banking and finance. IBF are different from conventional banking and finance as their objectives, operations, principles and practices must compliance with Islamic ethics and Islamic law (Shari’ah). Among other things, Shari’ah prohibits dealing in interest (riba), gambling and undertaking speculative transactions which subject matter and outcome are unknown (gharar), while it requires transactions to be lawful (halal).
Therefore, IBF have tended to modify the conventional banking and finance, interest model to non-interest operations. So, paying and receiving of interest unallowable in IBF because of interest, again, is prohibited (haram), thus how do IBF operate? Here partnership financing arrangements come in, substituting profit-loss sharing for interest as a method of resource allocation. Although a large number of different contracts feature in Islamic financing, one of…...

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