Nadia Sarasati

SUMMARY OF ACCOUNTING OF IJARAH

Al ijarah comes from the word al ajru which measn al ‘iwadhu (replace), ijarah is
deal of transfer of service and good by renting without replace the ownership of the goods
itself. The example of ijarah is bank or financial institution who rent equipment to one of
the consumer from the factory which manage by the bank. The financial institution or
bank may sell the goods that leased to the consumer, it is called as al-ijarah al-muntahiyah
bit-tamlik. Ijarah means lease contract and also hire contract. There are two parties
involved in ijarah business. Lesse and lessor. From the leasse point of view: there is
operating lease and capital lease. From the lessor point of view: operating lease, direct
financing lease and sales-type lease.

The prerequisition is the ijab and qabul. The parties which involve in making the deal
consist of the lessor, and the lesse. The object; payment (lease) and function from the
usage of the assets. The function of the asset in ijarah is a contract object which must be
guaranteed. The official deal is a statement from both parties who do the contract, can be
oral or other form which is equivalent.

The ownership trading in ijarah muntahiyah bittamlik may be done by hibah, selling
before the deal end with the price as much as the amount of the rest of the installment,
selling in the end of the deal period with the certain payment which is included in the
beginning of the deal, and selling by installment with the price agreed in the deal.

The object of ijarah is an assets which can be amortized and depreciable based on the
economic life.

If an entity sell the object of ijarah to other entity and the rent it, the entity realized the
gain or loss in the current period in the income report and apply the accounting for lesor.
If an entity rent continuesly to other party of the asset that rent from the lessor, so the
entity will apply the accounting for both lesse and lessor in this PSAK.
The journal of ijarah:

● lessor (Mu’jir)

1. Date of acquisition

Asset of Ijarah xx
Cash xx

2. Depreciation

Depreciation expense xx
Revenue from Ijarah xx

3. received rent revenue from lessee in the due date

Cash xx
Revenue from Ijarah xx

4. lessee has not paid the rent payment in the due date

A/R-Ijarah xx
Revenue from Ijarah xx

5. receive rent revenue

Cash xx
A/R-Ijarah xx

6. any repairment expense

Repairment expense-Asset of Ijarah xx

Cash xx

7. any decreasing quality of the object which is not caused by lessee, causing amount
received from rent payment is bigger than its fair value

The excess of rent revenue expense xx

Cash / A/P to lessee xx
8. Takeover of the object in Ijarah Muntahiyah Bittamlik

i. Through hibah when all rent revenue payment has been received and the
object does not have residual value

Accum. Deprec.-Asset of Ijarah xx

Asset of Ijarah xx

ii. Through selling of the object before the end of the rent period (selling price =
the amount of the rest of installment)

a) If its selling price is higher than its book value

Cash xx
Accum. Deprec.-Asset of Ijarah xx
Asset of Ijarah xx
Gain on sale on Asset of Ijarah xx

b) If its selling price = its book value

Cash xx
Accum. Deprec.-Asset of Ijarah xx
Asset of Ijarah xx

c) If its selling price is lower than its book value

Cash xx
Accum. Deprec.-Asset of Ijarah xx
Loss on sale on Asset of Ijarah xx
Asset of Ijarah xx

iii. Through selling the object after all rent revenue payment has been received
and the object does not have residual value

Cash xx
Accum. Deprec.-Asset of Ijarah xx
Gain on sale on Asset of Ijarah xx
Asset of Ijarah xx
 iv. If lessee promised to buy the object but he cancelled it, and its fair value is
lower than its book value

A/R to lessee xx
Accum. Deprec.-Asset of Ijarah xx
It is to record the decreasing value of the asset of Ijarah

v. If lessee did not promise to but the object and then he decides to not buy the
object, and its fair value is lower than its book value, then that decreasing of
book value was recognized as loss of:

Depreciation expense-Asset of Ijarah xx

Accum. Deprec.-Asset of Ijarah xx

● lessee (Musta’jir)

1. Date of rent payment

i. Rent payment for one period

Rent expense-Asset of Ijarah xx

Cash xx

ii. rent payment for more than one period

Prepaid rent-Asset of Ijarah xx

Cash xx

2. At the date of amortization of prepaid rent

Rent expense-Asset of Ijarah xx

Prepaid rent-Asset of Ijarah xx

3. When the repairment cost become the expense of lessor

A/R to lessor xx
Cash xx
4. If there is any decreasing quality of the object which is not caused by lessee, which
causes amount received from rent payment is bigger than its fair value

Cash / A/R to lessor xx

The excess of rent revenue expense xx

5. Takeover of the object in Ijarah Muntahiyah Bittamlik

a) If the rent payment comes from the bank

Asset of Ijarah xx
Other operation revenue xx

b) If the rent payment comes from unbound investment fund

Asset of Ijarah Xx
Other main operation revenue xx

c) If the rent payment comes from investment fund

Asset of Ijarah xx
Other operation revenue xx
Other main operation revenue xx