Tuesday, June 30, 2009


The Department of Islamic Development Malaysia (JAKIM) has published a book in the year 2001 entitled “Panduan Zakat di Malaysia”. According to this book, there are two highly recommended methods of business zakat accounting to be applied.

The first method is urfiyyah. This method is also known as the adjusted growth capital which considers the equity of ownership in a particular company and other financial sources. The equation is as follows:

Equity + Long Term Equity - Fixed Asset - Non Current Asset + / - Adjustments
Second is the syariyyah method. This method is also called the adjusted working capital. It considers current assets and deducts current liabilities and the necessary adjustments by adding or deducting clarified items as given by this equation:

Current Asset - Liabilities + / - Adjustments

Differentiation of both methods can be demonstrated by the equation below:
Equity + Long Term Liabilities - Fixed Assets - Non Current Assets = Current Asset - Current Liabilities

Both methods have the same resulting answers which are derived from the same balance sheet.

However, most of the states in Malaysia use adjusted working capital method. Some adjustment is needed. First is the deduction from current assets.

In this case, non-permissible item, limited ownership and non-productive current assets are examples of useful items to be considered.
Second is the addition to current assets.

All donations for charitable purposes and purchases on fixed assets are done at the last quarter using internal fund and these items need to be added to current assets.

Third is the addition to current liabilities.

Current liabilities which can be deducted are only from operation in nature including trade creditors, operation payables such as salary, electricity, telephone and tax. Therefore, items such as non-operation payable, dividend payable and overdraft are not allowed to be deducted and principally need to be added to current liabilities.

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