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CIPA Sample Questions
CIPA Sample Questions
Ahmad invested USD 200000 in an Islamic bank on 1/10/2008 on the basis of mudaraba
contract in which he allowed to commingle his fund with the bank’s own funds and to
deduct 10% of profit as share of mudarib. The bank used the funds in funding a
murabaha operation done with client Mahmoud on 1/11/2008 with a nominal value of
USD 220000 (on 10 monthly installments). After 5 months of regular payments the
client Mahmoud declared his bankruptcy which forced the bank to seize the asset (subject
of murabaha contract) and sell it via auction at 1/4/2009 with a value of USD180000.
a b c d
Ahmad 9000 10000 18000 - 20000
Bank 1000 1000 2000 0
Mahmoud - 30000 0 - 40000 0
If the results are USD1000 profit from mudaraba operation and USD 20000
losses from musharaka operation (with no due negligence), what is the effect
on the involving parties?
a b c d
Ahmad - 5800 - 10200 - 9800 - 20000
Bank -5800 200 200 0
Mahmoud 600 600 600 300
Isam - 8000 - 10000 - 10000 - 8000
5. Upon receiving a binding purchase order to buy a car with market value of
USD 11000, the bank collected from the client USD 1000 as Hamish
Jiddiyyah on 25/10/2008, then signed and executed the related Murabaha
contract at 1/11/2008 with the value of USD 10000 collectable via 10 monthly
installments (and Hamish Jiddiyah was considered as payment for the first
installment). Knowing that the car cost the bank USD 9000 and the client is
paying the installments on regular basis, what is the effect of the operation on
the bank accounts at 31/12/2008?
a b c d
Receivables -Client 8800 8000 8000 8000
Account
Income – deferred sales 2200 1000 200 200
Deferred profit 0 0 800 800
Unrecognized gains 0 1000 0 1000
I. Debt owed by either the Mudarib or another party to the capital provider
can be used as capital in a Mudaraba contract.
II. In a Murabaha contract, the institution is prohibited from selling any item
before having acquired the item.
III. Tradable bonds can be issued based on the debt from a Salam contract.
IV. An Ijarah contract may be executed for an asset undertaken by the lessor
to be delivered to the lessee according to accurate specifications, even if
the asset so described is not owned by the lessor.
V. In a Mudaraba contract, the capital provider (rab al maal) always permits
the Mudarib to administer a Mudaraba fund without any restrictions.
Answer:
a) I and V
b) II, III and V
c) II, III, and IV
d) I, III and V
7. For the purposes of financial accounting for Islamic Financial Institutions, how
the effect of changes in the purchasing power of money is dealt with?
a) Financial Statements are restated to reflect the changes in the purchasing power or
money.
b) Effect of such changes are accounted for in the Statement of Equity
c) For the purposes of financial accounting, the stability of the purchasing power of
the monetary unit is assumed.
d) Effect of any changes in the purchasing power of money is accounted for in the
income statement.
Answer:
a) I and V
b) I and II
c) II and III
d) III and IV
Answer:
a) I
b) II and III
c) IV
d) I and IV
10. XYZ Ltd, the purchase orderer, in a binding promise under a Murabaha
contract with an Islamic Bank agrees to buy goods worth USD 5,500 and pays
USD 500 as Hamish Jiddiyyah. However, XYZ fails to fulfil its promise and, as a
result, the Islamic Bank sells the goods to another client for USD 3,000. The
accounting treatment for this in the Islamic Bank’s books will be (assuming cost
of goods for the bank was USD 5,000.)
a) Paid in advance
b) Payable within a stipulated time
c) Payable upon completion
d) Any of the above
13. It is not permissible for an Islamic Bank to charge its customer a fee for a
Murabaha transaction, except for:
a) Commitment fee, in exchange for the right to contract the Murabaha transaction.
b) Credit facility fee, for the provision of the Murabaha credit facility.
c) Syndicated financing fee, if such syndicated facility is arranged.
d) None of the above
15. In cases involving personal guarantee the guarantor may be entitled to;
Owner's Equity
Paid Up Capital 10,000,000
Retained Earnings 3,000,000
Investment Risk Reserves 6,000,000
Profit Equalization Reserves 2,000,000
Total Owner's Equity 21,000,000
Based on the above Statement of Financial Position, and from general accounting point of
view, answer questions 16 to 20 (assuming that the trial balance that was used to prepare
this statement of financial position is balanced, that there is no omission of any accounts,
and that there is no mistake in the amounts).
17 – The Statement of Financial Position is not balanced due to (assuming that the trial
balance that was used to prepare this statement of financial position is balanced, that
there is no omission of any accounts, and that there is no mistake in the amounts):
A - Calculation error
B – “Provision for doubtful “other receivables”” should be presented under liabilities.
C – “Salam Financing” should be presented under assets and Parallel Salam should be
presented under liabilities.
D - None of the above.
18 – Assuming that the historical cost of the Fixed Assets amounts to USD 4,000,000
while the depreciation expenses were USD 300,000 for 2009, and that the accounting
policies adopted by the bank do not allow revaluation of Fixed Assets, what is the amount
for accumulated depreciation of the Fixed Assets?
A – USD300,000.
B - USD1,500,000.
C – Nil.
D – USD2,500,000.
19 - What is your opinion about “Investment Risk Reserves” and “Profit Equalisation
Reserves”?
A - No opinion, due to the absence of detailed information.
B - No problem with these accounts.
C – “Profit Equalization Reserves” should be reflected in “Equity of Unrestricted
Investment Account” only.
D – “Investment Risk Reserves” should be presented in “Equity of Unrestricted
Investment Account” only.