The main differences between Islamic and conventional accounting, provide some

justifications for the addition of the world ‘Islamic’ to the word accounting, make a
prima facie case for Islamic accounting and finally make the important distinction
between accounting for Islamic banks and Islamic accounting, which is presently
thought of by many people as synonymous.
Islamic accounting can be defined as the “accounting process” which provides
appropriate information (not necessarily limited to financial data) to stakeholders of an
entity which will enable them to ensure that the entity is continuously operating within
the bounds of the Islamic Syariah and delivering on its socioeconomic objectives.
Islamic accounting is also a tool, which enables Muslims to evaluate their own
accountabilities to God (in respect of inter- human/environmental transactions).
Discuss factors that contribute towards the need for Islamic Accounting.

For the past 25 years, there’s a great change in the Muslim world – Islamic fundamentalism
or Islamic resurgence.

The most important aspect of the resurgence is the aspiration of the Muslims to order their
political, social and economic life in accordance of the Islamic teachings and traditions as the
Islamic revivalists claimed that non-Islamic political and economic model have failed the
Islamic world.

Views that conventional accounting is unsuitable to an Islamic society as it embraces

fundamental values and principles which are in conflict with its values.

Adopting or even modifying conventional accounting concepts is deemed insufficient to

develop an accounting system which provides information that will lead to behaviour
consistent with Islamic norms and towards Islamic objectives.

Growing importance of the Islamic banking industry in the global economics where more and
more business organisations prefer to seek funding from Islamic banking industry, however
Islamic banking permit financial support only to Islamic compliant businesses.

Companies operating in the Islamic environment are expected to produce accounting

information in line with the syariah requirement.

In addition, the establishment of Islamic organisations in many Muslim countries with their
stated Islamic objectives reinforces the need for Islamic accounting.

The lack of coherent framework for Islamic accounting is seen as being an impediment to the
development of Islamic investment vehicles as well as hampering the development of a
robust Islamic capital market – there’s absence of a proper set of accounting standards for the
recognition, measurement and disclosure of Islamic based transactions and the existing
MASB’s standards have not been able to address accounting issues within Islamic Banking
operations adequately.

Further the need for Islamic accounting is viewed as necessary as a result of increasing
dissatisfaction with conventional accounting.