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Islamic Accounting: Ijarah Contract
Finance & Accounting
Pages 10 (2510 words)
ISLAMIC ACCOUNTING Table of Contents Table of Contents 2 Introduction 4 Ijarah Contracts 4 Ijarah 4 Ijarah wa Iqtina 4 Ijarah Thumma Al-Bai 5 Ijarah-wa-Iktina 5 Features of Ijarah Contract 5 Services and Usufruct 5 Assets under Ijarah 6 Liabilities and Ownership Rights 6 Utilisation of Assets under Lease 6 Period of Lease 6 Payment of Lease Amounts 6 Enhanced Features 7 Default and Compensation 7 Promise in Ijarah Contract 7 Termination of Ijarah Contract 7 Selling of Leased Assets 8 Takaful for Ijarah 8 Leasing and Ijarah – Similarities and Differences 8 Differences in Accounting Treatment of Ijarah and Financial Lease 10 Ijarah – Accounting Treatments 11 Asset Recognition 11 Revenue Rec
There can be various types of Ijarah contracts which have been discussed in this study. The features of Ijarah contracts have also been studied in details. Although Ijarah contracts are similar to leasing contracts, still some differences exist. Accounting and Auditing Organisation for Islamic Financial Institutions, (AAOIFI), sets out standards for accounting of Ijarah contracts. The impact of International Financial Reporting Standards (IFRS) on Ijarah contract accounting has also been discussed in this study. Ijarah Contracts Ijarah It means leasing. It includes a contract where the financial institution buys equipment, machinery and other different assets and then leases it to the owner of a business firm for a rent or fee. The contract has provisions for the lease duration and the amount of fees to be set out in advance. The financial institutions possess the ownership title of the leased assets during the lease period. ...
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