SET 1

END OF SEMESTER EXAMINATION

(DECENTRALIZED)
SEMESTER 2, 2012/2013 SESSION

KULLIYYAH OF ECONOMICS AND MANAGEMENT SCIENCES


Programme : BACC Level of study : 3 & 4

Time : 9.00 am 12.00pm Date : 20/05/2013

Duration : 3 Hr(s) 0 Min(s)

Course Code : ACC 4561 Section(s) : 1

Course Title : Accounting for Islamic Banks


(This Question Paper Consists of 8 Printed Pages with 3 Sections of Questions)


DO NOT OPEN UNTIL YOUR ARE ASKED TO DO SO

INSTRUCTION(S) TO CANDIDATES

1. Answer ALL questions
2. Show ALL your workings clearly
3. All answers are to be written in INK


ANY FORM OF CHEATING OR ATTEMPT TO CHEAT IS A SERIOUS
OFFENCE WHICH MAY LEAD TO DISMISSAL

APPROVED BY:




SET 1

SECTION A: MULTIPLE CHOICE QUESTIONS

1. Accounting and Auditing Organization for Islamic Financial Institution (AAOIFI)
as one of the standard setter for Islamic financial institution was established in:

a. Malaysia
b. Bahrain
c. Abu Dhabi
d. Dubai

2. AAOIFI prescribes 7 sets of financial statements for Islamic Financial Institutions.
Which of the following is (are) NOT suggested by AAOIFI?

I Statement of Financial Position
II Statement of Changes in Restricted Investment Funds
III Value Added Statement
IV Environmental Report
V Statement of Retained Earnings

a. I and II
b. II and III
c. III and IV
d. III and V

3. The method of settlement for Istisna contract could be:
a. In advance
b. Installment
c. Deferred to a specified future time
d. All of the above

4. All of the following statements are TRUE about Istisna revenue except:

a. Under percentage completion method: Profit Margin is the difference between
cash price and estimated total Istisna costs
b. Under percentage completion method: Profit shall be added to Istisna work
in progress account
c. Under completed contract method: Costs are not carried forward in Istisna
work in progress account
d. Under completed contract method: No contract revenue shall be recognized
until the contract is fully completed contract

5. Which of the following statement(s) is (are) TRUE?

I. Al-Sani mean the seller
II. Al- Masnoo mean the ultimate buyer
III. Al-Mustasni mean the subject matter



2

SET 1

a. I only
b. II only
c. I and III
d. I, II and III

6. Unrestricted investment accounts are disclosed in the statement of financial
position per AAOIFIs requirement as

a. part of liabilities
b. part of owners equity
c. a separate item after owners equity
d. a separate item between liabilities and owners equity

7. Which of the following is (are) NOT TRUE of a Musharakah ?
I. A form of partnership
II. Each party contributes to the capital of partnership equally
III. Profits are shared according to the agreed profit sharing ratio
IV. Losses are distributed according to the agreed profit sharing ratio

a. I and II
b. I and III
c. II and IV
d. IV only

8. The primary purpose of Accounting and Auditing Organizations of Islamic
Financial Institutions (AAOIFI) is:

a. To enhance the confidence of users of the financial statements of the IFIs and
ultimately to promote IFIs
b. To enhance the confidence of standard setters of the IFIs and ultimately to
promote IFIs
c. To enhance the confidence of the auditors of the IFIs and ultimately to
promote IFIs
d. To enhance the confidence of preparers of the financial statements of the IFIs
and ultimately to promote IFIs

9. Which of the following qualitative characteristics of accounting information is not
valid in Islamic accounting?

a. Reliability
b. Substance over form
c. Relevance and timeliness
d. Consistency


For Questions 10 to 14, refer below.
On 1 J anuary 2010, Aimi Berhad entered into a Mudarabah contract with An-Nuur
Islamd.ic Bank. The bank agreed to provide the total financing of RM 1,240,000 for a
specific project.

3

SET 1

Profit sharing ratio as agreed between the bank and Aimi Berhad is in the ratio 70%
and 30% respectively. Profits and losses for the first 3 years of the agreement were as
follows:
2010 Loss RM50,000
2011 Profit RM120,000
2012 Profit RM30,000

An-Nuur Islamic bank discovered in 2011 that 20% of the losses incurred in 2010 was
due to the mismanagement of Aimi Berhad. The losses were adjusted in that year and
the banks share of profit in any year was paid in the subsequent year.

10. The balance of Mudarabah Financing in the Statement of Financial Position as at
31
st
December 2010 is:
a. RM 1,240,000
b. RM 1,225,000
c. RM 1,200,000
d. RM 1,190,000

11. The profit for An-Nuur Islamic bank for the year 2011 was:
a. RM 84,000
b. RM 65,000
c. RM 36,000
d. RM 120,000

12. The double entry for profit received is
a. Debit Mudarabah Financing, Credit Profit and Loss
b. Debit Cash, Credit Mudarabah Financing
c. Debit Cash , Credit Profit and Loss
d. Debit Mudarabah Financing, Credit Cash

13. Where there are several parties of capital providers and one entrepreneur, this is
called:
a. Bilateral Mudarabah
b. Multilateral Mudarabah
c. Re Mudarabah
d. None of the above

14. The double entry to start the Mudarabah financing is:
a. Debit Cash, Credit Mudarabah Financing
b. Debit Mudarabah Financing, Credit Cash
c. Debit Mudarabah Financing, Credit Mudarabah assets
d. Debit Profit and Loss, Credit Mudarabah Financing

15. The definition of Al-Muslam Fihi is:
a. The seller
b. The commodity
c. The payment
d. None of the above (15 marks)


4

SET 1

SECTION B
QUESTION 1

Bio-Energy Limited is a company which sells health related products. The company
approached AmIslamic Bank to apply for a funding of an order of 10 vans to be
imported from Germany to be used in delivering their products in Malaysia. The
purchase price of one van is RM 200,000.

AmIslamic Bank agreed to finance the transaction on the principle of Murabahah
basis at a profit margin of 8% per annum. Bio-Energy Limited paid 10% of the
purchase price as Hamish Jiddiyah to AmIslamic Bank. The company also agreed
that if they fail to pay on time, a penalty of 1% of the receivable amount will be
charged for late payment penalty. However, following the guideline of the Shariah
Advisory council, AmIslamic Bank will disburse the late payment charges to charity.
Bio-Energy Limited also agreed to settle the Murabahah financing over a five years
period on half-yearly installment.

On 1 February 2012 after a discussion with the vendor of the vans in Germany,
AmIslamic Bank fully paid the purchase price of the shipments. The following are the
details of the transaction:


Shipment related cost


Amount (RM)

Date
Purchase price 2,000,000 1 February 2012
Shipping and Insurance cost 50,000 1 April 2012
Port handling expenses 25,000 15 May 2012

Murabahah Transaction


Hamish Jiddiyah ? 15 J anuary 2012
Murabahah Financing date ? 30 J une 2012



Installments details


Number of installments

2x5 years=10 Installments
First installment date

30 J une 2012
Second installment date 31 December 2012 (Bio-Energy Limited
only paid on 31 March 2013)
Third installment date

30 J une 2013




5

SET 1

Required:
a. Prepare the necessary J OURNAL ENTRIES for the transactions in the book of
AmIslamic Bank at the commencement of the transaction, delivery of the
shipment and payment of the installments up until 30 J une 2013.
(10 marks)

b. Prepare an extract of Income Statement and Statement of Financial Position as
at 31 December 2012 to show the amount of net Murabahah receivable and
Murabahah income.
(6 marks)

c. What will happen to Murabahah financing amount if the amount paid by Bio-
Energy Limited on 15 J anuary 2012 is Urboun and the customer concludes the
sale?
(3 marks)

d. Explain the differences between Hamish Jiddiyah and Urboun.
(3 marks)

e. Murabahah financing are different from the conventional deferred payment
sale. Discuss the differences between the concept of Murabahah and
conventional deferred payment sale.
(5 marks)

f. According to AAOIFI FAS No. 2, what should be the method used for the
measurement of Murabahah asset by the Islamic bank?
(2 marks)
[Total: 30 marks]

QUESTION 2

Affin Islamic Bank Bhd
Statement of Financial Position as at 30 Zulhijjah 1433

Assets RM RM
Cash and balances with banks and agents 1,456,925
Deposits and placements with financial institutions
Investment-Held for trading
Investment-Available for sale
Bills receivables
Mudarabah deposits
2,146,975
1,264,859
3,121,452
444,525
2,154,721
Musharakah deposits
Murabahah financing
Ijarah financing
5,123,648
16,497,528
11,286,459
Statutory deposits with Bank Negara Malaysia 26,586,958
Fixed assets 2,156,425
Intangible assets 2,647,853
Total assets 74,888,328



6

SET 1


Liabilities

Deposits from customers 21,469,758
Deposits and placements of banks and other financial
institutions
2,146,856
Bills payable 545,684
Short term liabilities 2,974,852
Provision for investment risk 2,156,891
Long term loan 915,642
Total liabilities 30,209,683

Shareholders Funds
Share capital 20,000,000
Reserves 3,158,645
Retained earnings 21,520,000 44,678,645
74,888,328

Additional information:

Cash equivalent value is determined on the 30 Zulhijjah 1433 for investment held for
trading and investment- available for sale are RM3.0 million and RM2.1 million
respectively.


Required:
a. Determine the amount of zakat payable by Affin Islamic Bank Bhd. for the
financial year ended 30 Zulhijjah 1433 based on the two methods as
recommended by AAOIFI FAS 9.
(16 marks)

b. What are the differences between the two methods of calculation as
recommended by AAOIFI FAS 9?
(4 marks)
c. List, at least, six (5) out of eight (8) Zakat disclosure requirements as required
by FAS 9 for the financial Statement of Islamic financial institutions.
(5 marks)

[Total: 25 marks]












7

SET 1

SECTION C

QUESTION 1
Shariff and Rahman (2005) in the article An exploratory Study of Ijarah Accounting
Practices by Malaysian Financial Institution stated that :

Literally, Ijarah means to give something on rent. As a term of Islamic fiqh, Ijarah can
also refer to wages paid to a person in consideration of the services rendered by him. In
the context of Islamic banking, Ijarah can be defined as a process by which the usufruct
of a particular property is transferred to another person in exchange for a rent claimed
from him/her

Required:
a. Explain the basic features of Al-Ijarah, Al-Ijarah Muntahiah Bil Tamleek and
Al-Ijarah Thumma Al-Bai.
b. What are the conditions that should be stated in an Al-Ijarah contract?
c. Explain the responsibility of a lessor and a lessee in Al- Ijarah contract.

(15marks)
QUESTION 2

Meera and Razak (2006) discussed some issue on Islamic home financing. They also
stated that:

BBA is a facility provided by the financier to assist the customer pay the cost of
financing, e.g. a house, over the tenor of financing, e.g. 20 years, at a fixed rate
determined by the financier. The financier initially buys the house from the customer
(cost of financing amount) and sells it back to the customer, plus of its profit margin7.

As the seller of the property, the Shariah requires the bank to hold ownership of the
property and to hold all liabilities arising, including defects. But currently, BBA
documentations show that the bank merely acts as a financier rather than a seller and
excludes itself of all liabilities.

Required:
a. What are the Shariah principles that have been ignored by BBA as stated by the
authors?
b. Define the word iwad and explain the importance of the three elements of iwad :
risk (ghorm), work and effort (ikhtiar) and liability (daman) for the sale
transaction.
c. Discuss the effects if the iwad concept is ignored in the Islamic financial
transaction.
d. Besides BBA, Salam financing is one of the Islamic financial product. Draw a
diagram for Salam financing and Parallel Salam.
(15marks)
[Total: 30 marks]




Total marks: 100 marks.
8