Accounting for Mudharabah dan Musyarakah

u It is a contract between two or more persons. Each
of the two parties contributes a portion of the
overall fund and participates in work. Both parties
equally divide profit or loss. It is a condition of this
type of partnership that contributed funds, work,
mutual responsibility and liability for debts be
equally shared by the parties. Both Hanafis and
Malikis have permitted this type of partnership but
have stipulated many restrictions for it.

Musharakah Mufawada

43

Musharakah A’amal

u It is a contract between two persons who
agree to accept work jointly and to share the
profit from such work. For example, two
persons of the same profession or craft may
agree to work together and to divide the
profit arising from such work on an agreed
basis.

44

u It is a contract between two or more persons who
have good reputation and prestige and who are
expert in trading. They share profit or loss
according to the guarantee to suppliers provided by
each partner. Accordingly, this type of partnership
does not require capital since it is based on credit
backed by guarantee.

Musharakah Al-Wujooh

45

MUSHARIK 1: ISLAMIC BANK
$100,000 MUSHARIK 2

$30,000 $200,000

PROFITS INVESTMENT $30,000
$60,000 PSR 50:50

LOSS

LOSS

46

• Recognition Of Islamic Bank’s
Share in Musharakah Profit or
Loss

47

No. Transactions/Events DR CR
Musharakah Cash
1. Financing for Financing
Customers and
Partners provided

2. Termination or Cash Musharakah
repayment of capital Financing

by partner

3. Profit received from Cash Profit & Loss
Musharakah Acc

4. Loss on Musharakah Profit and Musharakah
Loss Financing

5. Profit on sale of banks Cash Musharakah
share in a Diminishing Financing
Musharakah Profit & Loss
Acc

6. Amount outstanding Acc Musharakah
from partner at Receivable Financing

settlement

48

MUSHARAKAH
ACCOUNTING PROBLEM

Bank Syari’ah Malaysia Berhad has provided working capital to
Tijarah Construction Sdn. Bhd. based on the principle of Musyarakah
Mutanaqisah amounting to $400,000. Profit and loss sharing ratio as
agreed by both parties is similar to the ratio of capital contribution
which is 30:70 (Bank: Customer) at the beginning of the contract. The
repayment shall be equal throughout the contract period of four
years.

However, Tijarah Construction had financial difficulties during
year 2 and thus only managed to pay 50% of the agreed repayment
amount. Half of the amount outstanding in year 2 has been paid in
year 3 and another half was paid in year 4. Tijarah Construction also
experienced financial difficulties in year 4 whereby the scheduled
repayment outstanding at the end of the year was amounting to
$35,000.

49

q Year 1 : Profit : RM 180,000
q Year 2 : Loss : RM 150,000
q Year 3: Profit : RM 220,000
q Year 4 : Loss : RM 80,000
q Prepare extract of journal entries from the beginning until

the end of the contract to record the recognition of asset
and profit/loss of Musyarakah Mutanaqisah financing
provided by Bank Syari’ah Malaysia Berhad based on the
following recognition methods:

(i) Cash basis;
(ii) Accrual basis

50

51

Bank Mawaddah and Ziyad Corporation had entered into

musharakah mutanaqisah contract for house developing
project amounting to RM30,000,000. Ziyad Corporation

had contributed RM10,500,000 and the rest were provided
by Bank Mawaddah. The term of the contract is 4 years

and the partner is required to pay back the bank in 4 equal

installments yearly. The profit sharing ratio is agreed at 70 :
30 (Bank : Partner) and assumed to be constant

throughout the contract. The profit and loss from the
project as disclosed by the partner are as follows:

Year Profit / (loss)
1 (1,500,000)
2 11,000,000
3 (2,000,000)
4 10,500,000

You are required to determine the profit or losses based to
be recognized by both Bank Mawaddah and Ziyad
Corporation from year 1 to year 4 by filling the table
below.

52

1 70 : 30 YEAR
2 PSR
3 (Bank : Partner)
4 Capital of the bank

10,500,000 Capital of the
partner
(1,500,000)
11,000,000 Capital repayment
(2,000,000) by partner
10,500,000 CCR

53 (bank : partner)

Profit / (loss)

Profit / (loss) to
Bank Mawaddah
Profit / (loss) to
Ziyad Corporation

Ridho Islamic Bank and Sabar Company are partners of a project
in Raudhah Town. The principle applied for the partnership is
musharakah mutanaqisah. The informations of the partnership
at the beginning of the contract are as follows:

Ridho Islamic Bank Sabar Company

Capital RM591,000 RM394,000
contribution
Profit sharing 40% 60%
ratio

This project took 4 years to finish. In order to get full ownership

of the project, the company needs to make equal payment every

year. Both parties were agreed that the profit sharing ratio is to

be constant until the end of the project. Profits and losses from

the project as disclosed by partner are:

Year Profit / (Loss)

1 RM80,000
2 (RM60,000)

3 RM100,000
4 (RM50,000)

Please note that the repayment outstanding at the end of the

contract is amounting to RM45,000. You are required to prepare

journal entries for Ridho Islamic Bank from the beginning until the

end of the project based on accrual basis. 54

PSR % CCR % Profit/Loss Profit/Loss
Year (Ridho:Sabar)
RM80,000 Ridho Sabar
(Ridho:Sabar) 60:40 (RM60,000)
1 40:60 45:55 RM100,000 RM32,000 RM48,000
2 40:60 30:70 (RM50,000)
3 40:60 15:85 (RM27,000) (RM33,000)
4 40:60
RM40,000 RM60,000

(RM7,500) (RM42,500)

Year 0 Musharakah mutanaqisah financing / 591,000 591,000
Dr. Cash / 147,750
(Musharakah financing for the customer) 147,750
Cr. / 32,000 32,000
/ 120,750
Year 1 Cash 120,750
Dr. Musharakah mutanaqisah financing / 27,000 27,000
(repayment by the customer) // 147,700
Cr. 147,700
/ 40,000 40,000
Dr. Cash / 102,750
Cr. Profit and loss (40% X RM80,000) 102,750
(Profit received from musharakah financing) //
/ 55
Year 2 Cash
Dr. Musharakah mutanaqisah financing /
(repayment by the customer) /
Cr.
/
Dr. Profit and loss (45% X RM60,000) //
Cr. Musharakah mutanaqisah financing
(loss shared) /
/
Year 3 Cash
Dr. Musharakah mutanaqisah financing
(repayment by the customer)
Cr.

Dr. Cash
Cr. Profit and loss (40% X RM100,000)
(Profit received from musharakah financing)

Year 4 Cash
Dr. Musharakah mutanaqisah financing
(repayment by the customer)
Cr.

Sangat Jujur Islamic Bank and Kerjasama Baik Company are

partners of a project in Bertuah Town. The principle applied for

the partnership is musharakah mutanaqisah. The information of

the partnership at the beginning of the contract is as follows:

Capital Sangat Jujur Kerjasama Baik
Islamic Bank Company
contribution
Profit sharing RM480,000 RM480,000

ratio 40% 60%
Loss sharing ratio
50% 50%

This project took 4 years to finish. In order to get full ownership of

the project, the company needs to make equal payment every

year. Both parties were agreed that the profit sharing ratio is to be

constant until the end of the project. Profits and losses from the

project disclosed by partner are:

Year Profit / (Loss)
1 RM80,000
2 (RM60,000)
3 RM100,000
4 (RM50,000)

You are required to prepare journal entries for Sangat Jujur

Islamic Bank from the beginning until the end of the project

based on accrual basis. 56

Year 1 480,000
Dr. Musharakah mutanaqisah financing 480,000

Cr. Cash 120,000
(Musharakah financing for the customer) 120,000

Dr. Cash 32,000
Cr. Musharakah mutanaqisah financing 32,000
(Repayment by the customer)
96,000
Dr. Cash 96,000
Cr. Profit and loss (40% X RM80,000)
(Profit received from musharakah financing) 22,500
22,500
Year 2
Dr. Cash 120,000
120,000
Cr. Musharakah mutanaqisah financing
(Repayment by the customer) 40,000
40,000
Dr. Profit and loss (37.5% X RM60,000)
Cr. Musharakah mutanaqisah financing 100,000
(Loss shared) 100,000

Year 3
Dr. Cash

Cr. Musharakah mutanaqisah financing
(Repayment by the customer)

Dr. Cash
Cr. Profit and loss (40% X RM100,000)
(Profit received from musharakah financing)

Year 4
Dr. Cash

Cr. Musharakah mutanaqisah financing
(Repayment by the customer)

57

THE WORD

ACCOUNTING

COMES FROM THE


WORD

ACCOUNTABILITY.
IF YOU ARE GOING


TO BE RICH,
YOU NEED TO BE

ACCOUNTABLE


FOR YOUR

MONEY.



– ROBERT KIYO
SAKI

REFERENCES

Amin, H. (2008). Accounting for Islamic Bank

Transactions. Universiti Malaysia Sabah.
Ayush Verma. (2021, February 2). An investigation of the

essentials of Mudarabah contract under Islamic law and

impact of implementation. iPleaders. Retrieved July 21,

2022, from https://blog.ipleaders.in/investigation-

essentials-mudarabah-contract-islamic-law/
Khalid Follow Dosen, M. (n.d.). Musharakah. Share and

Discover Knowledge on SlideShare. Retrieved July 21,

2022, from https://www.slideshare.net/emkay84/isb540-

musharakah
Rahman, A. R. A. (2012). An introduction to islamic

accounting: The theory and practice. Centre for Research

and Training (CERT).
Topic 5 mudharabah & musyarakah - topic 5 Mudharabah

and Musyarakah • Mudharabah and Musyarakah are.

StuDocu. (n.d.). Retrieved July 21, 2022, from

https://www.studocu.com/my/document/multimedia-

university/islamic-banking-and-finance/topic-5-

mudharabah-musyarakah/8703078
Usmani, : D. M. I. A. (Ed.). (n.d.). The basic rules of

Musharakah. IslamicMarkets.com. Retrieved July 21,

2022, from https://islamicmarkets.com/education/the-

basic-rules-of-musharakah



Accounting for Mudharabah and Musyarakah caters for the Islamic
banking courses taken by students at institutions of higher learning. This
book consists two main topics, which are Mudharabah and Musyarakah.
For both topic would be discussed about the definition, types, and
calculation of the both contract with the journal entries transaction.



Key features

Based on the latest polytechnic syllabus of Islamic accounting for the
islamic financial institution subject that consists the topic regarding
Mudharabah and Musyarakah.
Provide review question to evaluate student understanding.

NORHIDAYATI BINTI MOHD KOSNI
Completed her Bachelor Degree (2007) at Universiti Utara Malaysia
(UUM) in Accounting (Information System) and hold professional
certificate of Financial Sector Talent Enrichment Programme (FSTEP)
under Institute of Bank-Bank Malaysia (IBBM) in 2009. Previously,
she have been worked in accounting and finance fields from various
industry such as food and beverage, fun and leisure related brands,
multi-level marketing, beauty cosmetics and investment bank. She
has 10 years of teaching experience and currently teaching at
Politeknik Sultan Idris Shah (PSIS), Sabak Bernam
SITI AISHAH BINTI MOHAMAD SIS.
Completed her Bachelor Degree ((2009) in Islamic Finance and
Banking from Universiti Utara Malaysia (UUM). She has 13 years
teaching experience in Islamic banking courses. Joined Politeknik
Sultan Idris Shah (PSIS), Sabak Bernam since 2009 until now.
SITI NASUHA BINTI MOHBIN
She hold Master in Islamic Banking and Finance from Universiti
Teknologi Mara (UiTM) and Degree in Business Administration
(Hons) (Islamic Banking) from same university. She began her
teaching career as the lecturer at private college in 2017 and
presently work as lecturer at Politeknik Sultan Idris Shah (PSIS),
Sabak Bernam Selangor. She has 4 years’ teaching experience is
Islamic banking courses.