THE DIFFERENCES BETWEEN CONVENTIONAL AND ISLAMIC ACCOUNTING
The concern of this project paper is to explore the differences between Islamic accounting and its conventional counterpart. The distinctions need to be addressed as both accounting is presently thought of many people as synonymous. There is danger for such kind of perception because the basic building blocks for respective accounting are worlds apart. As for professional accountants who have been taught on the idea for accounting to be ‘objective’ and value-free, the idea for attaching a religion may seems to be embarrassing and unprofessional. However, with the resurgence of Islam globally, the awareness for the need of Islamic accounting arises. Islamic accounting as a whole is able to serve the whole gamut of stakeholders. Its principles do not serve the interest of any particular group, but to the society as a whole which can make corporations accountable for their actions and ensure they comply with Shariah principles.
1.0 1.0 Introduction
It is widely accepted that the primary objective of accounting is to provide useful information to assist users in making economic decisions. Thus, it can be argued that accounting is therefore, a religious obligation. Hence, if accounting is a religious obligation, then the rules of accountability must be purely divine. In order to do so, appropriate accounting framework based on Shariah principles must be in place. The motivation for the development of Islamic accounting comes together with the emergence Islamic economic and Islamic resurgence for the last two to three decades. The awareness for the need for Islamic accounting is due to basic building blocks of conventional accounting itself since the International Financial Reporting Standards (IFRS) are based on interest-based elements. Because of the interest-based requirement, the conventional accounting adopts the ‘historical cost and conservatism...
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