SYARIAH

ACCOUNTING
MURABAHAH
AGENDA
MURABAHA TO THE PURCHASE
WHAT IS MURABAHAH ORDER

REQUIREMENT FOR MURABAHA ANALYSIS

MURABAHA AND
DEFAULT
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 01 WHAT IS MURABAHA

REQUIREMENT FOR
02 MURABAHA

MURABAHA AND
03

MURABAHA
DEFAULT

MURABAHA TO PURCHASE
04 ORDER
WHAT IS MURABAHA
Murabaha is an Islamic financing structure in which an
intermediary buys a property with free and clear title. Murabaha
is not an interest-bearing loan, which is considered riba (or
excess), and is an acceptable form of credit sale under Sharia
(Islamic religious law).
REQUIREMENT
FOR MURABAHA
Murabaha is completed in two stages.
First stage, the bank purchases a commodity
that the client is selling
Second stage, the client agrees to a payment
schedule for repurchasing the good. Because
murabaha involves two transactions, two sale
contracts are used.
MURABAHA AND
DEFAULT
Murabaha default is an increasing concern for Islamic banks.
Many banks believe defaulters should be blacklisted and not
allowed future loans from any Islamic bank as a method of
decreasing murabaha default. Even if it is not expressly
mentioned in the loan agreement, this arrangement is
permissible in Shariah, the body of Islamic law. Therefore, if
a debtor is facing a genuine hardship and cannot repay a
loan on time, respite may be given as described in the
Quran. However, the government may take action in cases
of willful default.
 MURABAHA TO PURCHASE
ORDER
INTRODUCTION

DEFINITION

RULES, PRINCIPLE, COMPLEXITIES

RECOGNITION & MEASUREMENT

ACCOUNTING ILLUSTRATION
INTRODUCTION
MURABAHA TO PURCHASE ORDER

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DEFINITIO
N
Murabaha to the purchase orderer is a sale in which two parties or
more negotiate and promise each other to execute an agreement
according to which the orderer asks the purchaser to purchase an
asset of which the latter will take legal possession. The orderer
promises the purchaser to purchase the asset from him and give the
ordered a profit thereon. The two parties would conclude a sale after
the possession of the ordered to the asset. However, the purchase
orderer may or may not be obliged to conclude the sale.
MURABAHA TO THE PURCHASE ORDER
TRANSACTION

VENDOR ISLAMIC BANK CUSTOMER

1 2

The banks buys the goods for The Bank enters into a The customers pays the
murabaha sale from the murabaha contract with a bank in installments over the
vendor and pays for it (1) customer and delivers the contract period (3)
good (2)
MURABAHA TO THE PURCHASE ORDER
TRANSACTION

1
VENDOR ISLAMIC BANK CUSTOMER
3
2

The customer orders the bank to The bank buys and pays for The banks executes a murabaha
purchase goods , which it the goods from the vendor(2) contract of sale to the customer
promises (this may be binding or and delivers the goods, The
non binding) to buy from the customer pays for the goods on an
bank giving it some profit (1) installment basis to the bank (3)
RECOGNITION AND
MEASUREMENT
MURABAHA TO PURCHASE ORDER

RECOGNITION OF ASSETS RECOGNITION OF ASSETS

RECOGNITION OF ASSETS AVAILABLE RECOGNITION OF ASSETS AVAILABLE

FOR SALE. FOR SALE AT THE TIME OF DELIVERY
ACCOUNTING JOURNAL ENTRY TO RECOGNIZE THE
ASSETS
MURABAHA TO PURCHASE ORDER

AT THE TIME OF
WHEN THE INSTALLMENT RECEIVE
CONTRACTING
Dr. Murabahah / BBA Financing Dr. Cash account
account (Cost + Profit) Cr. Murabahah / BBA Financing
Cr. Cash or Payable account account (installment received)
Cr. Unearned Financing Income
account (Recognition of BBA
Financing asset)

WHEN THE INSTALLMENT IS DUE WHEN INCOME IS DUE TO

BUT NOT YET RECEIVE
Dr. Receivable account
Cr. Murabahah / BBA Financing
account (Installment Due)
RECOGNISE
Dr. Unearned Financing Income
account
Cr. Profit and Loss account
(Recognition of Murabahah / BBA
Income)
MEASUREMENT OF ASSETS
AAOIFI CONSIDER 2 ALTERNATIVE

FIRST ALTERNATIVE WAS TO MEASURE THE ASSET

AVAILABLE FOR DEFERRED PAYMENT

SECOND ALTERNATIVE WAS TO MEASURE THOSE

ASSETS AT THEIR ACQUISITION COST, WHICH IS THE
PURCHASE PRICE PLUS ANY DIRECT EXPENSES
ASSOCIATED WITH THE ACQUISITION PROCESS.
ACCOUNTING TREATMENT OF UNREALIZED GAINS AND LOSSES

Record the unrealized gains and losses in the income statement at the end of the
financial period.

Record the unrealised gains and losses resulting from the valuation of assets
available for deferred payment sale in a reserve account (investment fair value
reserve), and present this account in the statement of financial position at the end
of the financial period, taking into account the split between the portion related to
unrestricted investment account holders and owners equity