Question 1

For every debit, there must be a corresponding credit of larger amount and for every credit, there must be a corresponding debit of less amount.

Accepted Answer

In double-entry bookkeeping, for every debit, there must be a corresponding credit of equal amount, not larger or less. This ensures the accounting equation remains balanced.

Question 2

International Accounting Standards IAS. are the standards issued after 2001.

Accepted Answer

The International Accounting Standards (IAS) were issued by the International Accounting Standards Committee (IASC) until 2001. After 2001, the International Financial Reporting Standards (IFRS) are issued by the International Accounting Standards Board (IASB).

Question 3

The general definition of financial accounting remains unacceptable within the Islamic finance framework.

Accepted Answer

Financial accounting within the Islamic finance framework is generally accepted but must adhere to specific principles and standards that align with Islamic law (Sharia). These include the prohibition of interest (riba), uncertainty (gharar), and gambling (maysir), among others, which differentiate it from conventional financial accounting.

Question 4

Being focused on accountability and Sharī'ah compliance framework, the Islamic accounting standards have neglected the important objective of financial accounting: to provide useful information to the users of such reports.

Accepted Answer

Islamic accounting standards aim to provide useful information to users while ensuring compliance with Sharī'ah principles, thus not neglecting the objective of financial accounting but rather integrating it with ethical and religious considerations.

Question 5

Financial accounting is directed at the needs of the internal as well as the external decision makers.

Accepted Answer

Financial accounting is primarily directed at the needs of external decision makers, such as investors, creditors, and regulators, rather than internal decision makers, who are served by managerial accounting.

Question 6

International Financial Reporting Standards IFRS. which has replaced the International Accounting Standards IAS. is more relevant to multinational corporations with subsidiaries spread across different countries.

Accepted Answer

IFRS provides a common accounting language, making financial statements comparable across international boundaries, which is particularly relevant for multinational corporations operating in different countries.

Question 7

Unlike the conventional banks which aim at mobilising deposits and advancing loans on interest, the Islamic banks focus on investment financing and social services.

Accepted Answer

Islamic banks operate on Islamic finance principles, which prohibit interest (riba) and focus on asset-backed financing and social welfare activities, emphasizing profit and loss sharing and ethical investments.

Question 8

The Islamic finance industry requires its own set of accounting and financial reporting standards.

Accepted Answer

Islamic finance operates under Sharia law, which has unique rules and principles (such as the prohibition of interest), necessitating its own set of accounting and financial reporting standards to ensure compliance and transparency.

Question 9

What differentiates between financial accounting in both traditional and Islamic frameworks is the non-compliance of the former with Sharī'ah rules and regulations.

Accepted Answer

Financial accounting in Islamic frameworks is differentiated from traditional financial accounting by its compliance with Sharī'ah rules and regulations, which govern not only the ethical aspects but also the financial transactions to ensure they are free from interest (riba), gambling (maisir), and uncertainty (gharar).

Question 10

The American Accounting Association defines accounting to be "the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of that information".

Accepted Answer

This definition accurately reflects the American Accounting Association's view on the role of accounting in facilitating informed decision-making by providing relevant economic information.

Question 11

The significance of financial accounting in both traditional and Islamic frameworks is to enable the stakeholders to make informed decisions among various options in the conduct of business transactions.

Accepted Answer

Both traditional and Islamic financial accounting systems aim to provide accurate and transparent financial information to stakeholders, such as investors, creditors, and management, to facilitate informed decision-making regarding business transactions and investments.

Question 12

Accounting is a process whereby business operations and activities are measured, and the measurements are processed into information that is made available to decision-makers.

Accepted Answer

Accounting involves recording, classifying, summarizing, and interpreting financial transactions to provide useful information for decision-making purposes.

Question 13

The internal decision-makers include the company management and creditors while the external decision-makers are mainly investors and board of directors.

Accepted Answer

The internal decision-makers typically include the company management and board of directors, as they are directly involved in the governance and operational decisions of the company. External decision-makers are usually investors, creditors, and other stakeholders who are not part of the company's day-to-day operations.

Question 14

The IFRS are specifically meant for conventional and Islamic forms of business.

Accepted Answer

The IFRS (International Financial Reporting Standards) are designed for conventional financial reporting and do not specifically cater to Islamic finance, which may require additional standards to address its unique principles.

Question 15

Credit is an increase in assets, revenue and capital and a decrease in liabilities and expenses.

Accepted Answer

Credit increases liabilities, revenue, and capital but decreases assets and expenses.

Question 16

The concept of inheritance mawarith. in Islam typifies the duty of mankind towards his God.

Accepted Answer

The concept of inheritance (Mawarith) in Islam primarily deals with the distribution of a deceased person's estate among heirs according to Islamic law, rather than typifying the duty of mankind towards God.

Question 17

Muslim accountants share with their non-Muslim counterparts the same responsibilities in carrying out their duties.

Accepted Answer

The answer of Muslim accountants share with their non-Muslim counterparts...

Question 18

International Financial Reporting Standards IFRS. are a set of accounting standards developed by an independent, non-for-profit organisation called the International Financial Reporting Committee IFRC..

Accepted Answer

The International Financial Reporting Standards (IFRS) are developed by the International Accounting Standards Board (IASB), not the International Financial Reporting Committee (IFRC).

Question 19

Debit is the increase in asset and expenses while there is a decrease in liability, revenue and capital.

Accepted Answer

In accounting, a debit entry increases asset and expense accounts, and decreases liability, revenue, and equity (capital) accounts.

Question 20

Muslim accountants are expected to understand the fundamental religious principles underlying their chosen profession in addition to understanding the theoretical and practical aspects of their profession.

Accepted Answer

Muslim accountants, like professionals in other fields, are expected to align their work with Islamic principles and ethics, which includes understanding the religious guidelines that impact financial transactions and accounting practices.

Quiz 4: Financial Accounting of Islamic Banking Products