Basic Principles of Islamic Bank Accounting

With the increasingly strong legal basis of Islamic banks in Indonesia through the improvement of Act No. 7 of 1992 concerning Banking with Act No. 10 of 1998 which is then supplemented by Bank Indonesia policy in the form of a Decree of the Board of Directors of Bank Indonesia and see the potential that exists both domestically and outside the country then it is estimated that the prospects for growth and development of sharia banks in Indonesia will show encouraging developments given the opportunities for conventional banks to open branches or convert branches into sharia branches.

Meanwhile, to date the number of Islamic financial institutions throughout the world has approached 200 in number spread both in Muslim and Western countries such as in the UK, Switzerland, Denmark, etc., also in America and Australia in the form of cooperatives.

With the principle of operation that is different from conventional banks gives implications for differences in accounting principles both in terms of presentation and reporting.

The Islamic bank accounting report will consist of:

  1. Statements of financial position / balance sheet
  2. Income statement
  3. Cash flow statement
  4. Statement of changes in capital
  5. Investment change report is not free / limited
  6. Notes to financial statements
  7. Report on the source and use of zakat
  8. Statements of sources and uses of qard / qardul hasan funds

Some things that stand out in Islamic bank accounting are:

  • Wadiah demand deposits and savings are recorded / presented as debt in the balance sheet.
  • Free mudharabah investment accounts / deposits are recorded / presented as a separate account between debt and capital (not debt).
  • Non-free investment accounts are recorded separately as an off balance sheet account in the form of reports on changes in non-free investment positions.
  • Murabahah receivables are recorded at the remainder of the uncollected selling price reduced by the margin not received
  • Mudharabah and musyarakah investments are presented at the remaining value of the capital included or invested
  • Leased assets are stated at cost less accumulated depreciation.
  • Revenues are generally recognized on a cash basis while fixed costs are accrual basis.
  • Profit sharing between mudharib and sahibul mall is carried out on profit loss sharing or revenue sharing, while bank income from investment funds alone or from funds that do not come from investment accounts is entirely bank income, besides that bank service income is entirely bank revenue that is not divided yield.

Islamic bank accounting principles refer to the Accounting and Auditing Standards for Islamic Financial Institutions published by the Accounting and Auditing Organization for Islamic Financial Institutions based in Bahrain, which was established in 1991 on the IDB initiative and several large Islamic financial institutions and now has almost all members Islamic financial institutions.


by Abdullah Sam
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