Descriptionكلية العلوم الادارية والمالية

Assignment (2)
Deadline: Saturday 18/2/2023 @ 23:59
Course Name: Tax & Zakat Accounting
Student’s Name:
Course Code: ACCT 422
Student’s ID Number:
Semester: 2nd
CRN:
Academic Year: 1444 H
For Instructor’s Use only
Instructor’s Name:
Students’ Grade:
/15
Level of Marks: High/Middle/Low
Instructions – PLEASE READ THEM CAREFULLY
• The Assignment must be submitted on Blackboard (WORD format only) via allocated
folder.
• Assignments submitted through email will not be accepted.
• Students are advised to make their work clear and well presented, marks may be reduced
for poor presentation. This includes filling your information on the cover page.
• Students must mention question number clearly in their answer.
• Late submission will NOT be accepted.
• Avoid plagiarism, the work should be in your own words, copying from students or
other resources without proper referencing will result in ZERO marks. No exceptions.
• All answers must be typed using Times New Roman (size 12, doublespaced) font. No
pictures containing text will be accepted and will be considered plagiarism.
• Submissions without this cover page will NOT be accepted.
كلية العلوم الادارية والمالية
Assignment Question(s):

(15.0 Marks) Each Questions Carries 5 Marks)
1. A Zakat giver has an agricultural production at a market value of SAR 300,000. The zakat
giver has no accounting books to count the actual production expenses. Assume the zakat
receptacle reached the Nisab.
Required:
a. What is the zakat due in case of watering without cost?
b. What is the zakat due in case of watering with cost?
Answer:
كلية العلوم الادارية والمالية

2. A Zakat giver has a commercial building that generated an annual income of SAR 200,000
and incurred actual expenses of SAR 50,000. The book value of the building is SAR 75,000
while its market value is SAR 150,000.
Required: What is the zakat due?
Answer:
كلية العلوم الادارية والمالية

3. A Single Taxpayer In US Has The Following Information:
Item
US$
Gross Income
500,000
Exclusions
50,000
Deductions For Gross Income
100,000
Itemized Deductions
5,000
Standard Deduction
6,100
Personal Exemptions
3,900
Dependency Exemptions
3,900
Prepayments
75,000
Required: Compute The Tax Due Assuming the Tax Rate Is 20%.
Answer:
A Guide to Accounting Zakah
Part 1
A Guide to Accounting Zakah
Introduction
• Zakah is a duty that must be fulfilled by all “capable” Muslims for it
constitutes one of the five pillars of Islam.
• This premise is taken for granted by all Muslims; scholars as well as
common people
A Guide to Accounting Zakah
The most important questions are:
• How should a Muslim pay Zakah?
• What is the right way to pay Zakah?
Books of Fiqh (Islamic Jurisprudence) provide directions and details for
this task
A Guide to Accounting Zakah
Introduction
• To calculate alms (Zakah) on money for individuals and
companies, an accountant needs a guide to help him in defining
the items of assets, on which alms are due
• The accountant also needs to know how to assess the liabilities
which should be reduced from assets for alms in order to reach
the alms category and calculate the alms which are due to be
paid
A Guide to Accounting Zakah
First Essay: Accountancy Rules and Equations for Alms on Money
1. The annual rule
• Alms are calculated according to the lunar year. Counting starts when
the amount of money attains the Nisab (the minimum amount on which
alms should be paid)
• This includes all kinds of alms except alms on agriculture, fruits, mineral
assets and Rikaz (metals found in the earth)
A Guide to Accounting Zakah
First Essay: Accountancy Rules and Equations for Alms on Money
2. The rule of the independence of each year
• Each alms year is an independent one, and alms on a given
amount of money should not be more than once in the same
year.
• Duality should be avoided
A Guide to Accounting Zakah
First Essay: Accountancy Rules and Equations for Alms on Money
3. The rule of actual or assumed growth
• Actual or assumed growth of an amount of money is a condition
for any alms to be given from this money.
• Therefore alms are not due on fixed assets or things for personal
use. This is because the condition of actual or assumed growth
would not be met.
A Guide to Accounting Zakah
First Essay: Accountancy Rules and Equations for Alms on Money
4. The rule of capacity for obligation
• Alms are due on money which is abounding (more than basic
needs). No alms are due for little amounts of money.
• The amount of money should reach the Nisab. This guarantees
that only those who have the capacity of paying will be obliged to
pay.
A Guide to Accounting Zakah
First Essay: Accountancy Rules and Equations for Alms on Money
5. The rule of calculating alms on the total and the net amounts
For every kind of money or activity there is a rule for calculating alms
which are due on it. Some are calculated in relation to the total
amount and others are calculated in relation to the net amount.
A Guide to Accounting Zakah
First Essay: Accountancy Rules and Equations for Alms on Money
6. The rule of grouping monies of the same kinds
• It is permissible to group cash money of wealth to cash money
available from offers of commerce and other gained cash money
so that for all these monies there would be one Nisab and one
alms year.
A Guide to Accounting Zakah
First Essay: Accountancy Rules and Equations for Alms on Money
6. The rule of grouping monies of the same kinds
• However, it is not permissible to group different kinds of money.
For example, cattle, cash available from commercial operations,
and agriculture and fruits should not be grouped in one lump sum
and the alms paid on them.
A Guide to Accounting Zakah
First Essay: Accountancy Rules and Equations for Alms on Money
7. The rule of evaluating according to the current value of the market
• Evaluating cash money of wealth and cash money from offers of
commerce to define the alms due should be according to the
current value at the time of paying alms
• They should not be evaluated according to historic value, cost or
market, whichever is less
A Guide to Accounting Zakah
First Essay: Accountancy Rules and Equations for Alms on Money
The equations of calculating alms on money
1.
Receptacle of alms money = alms assets – liabilities which are due to
be paid at that moment
2.
Alms assets = assets which meet the conditions of obligatory alms
A Guide to Accounting Zakah
First Essay: Accountancy Rules and Equations for Alms on Money
The conditions of obligatory alms are:
a.
It should be full ownership
b.
Growth (actual or assumed)
c.
Completion of the year (except alms on agriculture, fruits, mineral
wealth, or minerals of the earth
d.
No other kind of alms has been paid on the same assets within the
same year
A Guide to Accounting Zakah
First Essay: Accountancy Rules and Equations for Alms on Money
The conditions of obligatory alms are:
e. Assets should abound basic needs
f. It should not include a debt which is due at the time
g. It should reach the minimum obligatory amount (Nisab)
A Guide to Accounting Zakah
First Essay: Accountancy Rules and Equations for Alms on Money
The equations of calculating alms on money:
3.
Short term liabilities = short term liabilities which are due payment
and in which the conditions of decision are filled
a.
Liabilities should be related to the activity
b.
Due payment during coming year
c.
Legally permissible
A Guide to Accounting Zakah
First Essay: Accountancy Rules and Equations for Alms on Money
The equations of calculating alms on money.
4. The amount due for alms (Nisab)= 85 grams of pure gold evaluated
according to current price
5. The amount of alms due = the receptacle of alms money once it reached
the Nisab X the price of alms
6. The price of alms = varies according to the kinds of money and activity.
The range is 2.5% to 20%.
A Guide to Accounting Zakah
Part 2
A Guide to Accounting Zakah
Second Essay; Executive Measures for Calculating Alms for
Individuals and Companies
Alms on money should be calculated according to the following steps:
1.
Defining the date completing the year. Varies according to the
circumstances of the alms giver
2.
Different monies owned by the alms giver should be assessed at the
end of the year according to the rules of alms
A Guide to Accounting Zakah
Second Essay; Executive Measures for Calculating Alms for
Individuals and Companies
Alms on money should be calculated according to the following steps:
3.
Assessment of liabilities (deductions) which are due to be decided
upon, from alms money according to the rules of Zakah
A Guide to Accounting Zakah
Second Essay; Executive Measures for Calculating Alms for
Individuals and Companies
Alms on money should be calculated according to the following steps;
4.
Defining the receptacle of alms by the deduction of due liabilities from
alms money. According to the following equation:
The receptacle of alms = alms assets minus due liabilities
A Guide to Accounting Zakah
Second Essay; Executive Measures for Calculating Alms for
Individuals and Companies
Alms on money should be calculated according to the following steps:
5.
Defining and assessing the amount of Nisab according to the kind of
money, the kind of activity, and the kind of alms. Nisab differs
according to the kind of alms (on what will the alms money be spent).
A Guide to Accounting Zakah
Second Essay; Executive Measures for Calculating Alms for
Individuals and Companies
Alms on money should be calculated according to the following steps:
6.
A comparison should be made between the receptacle of alms defined
in step 4 with Nisab defined in step 5 so as to know whether alms are
due or not. If the receptacle reaches the Nisab then alms would be
due.
A Guide to Accounting Zakah
Second Essay; Executive Measures for Calculating Alms for Individuals
and Companies
Alms on money should be calculated according to the following steps:
7.
Define the amount which should be taken from the receptacle of alms,
which accountants term as the percentage or price of alms. See Guide for
specifics on types and amounts of alms.
2.5% on wealth in cash, trade of commerce, and revenues… etc
5% on agriculture and fruits with costs
10% on agriculture and fruits without cost
20% Rikaz
A Guide to Accounting Zakah
Second Essay; Executive Measures for Calculating Alms for
Individuals and Companies
Alms on money should be calculated according to the following steps:
8.
Calculate the amount of alms by multiplying the amount of the
receptacle by the amount of the price (percentage) of alms. The result
should be the amount of due alms.
A Guide to Accounting Zakah
Second Essay; Executive Measures for Calculating Alms for
Individuals and Companies
Alms on money should be calculated according to the following steps:
9.
Defining who pays the due alms are as follows;
a.
For individuals and personal establishments; the individual or owner
should pay the due alms.
b.
For partnerships; the amount of due alms should be divided
between the partners according to the percentage of his share
A Guide to Accounting Zakah
Second Essay; Executive Measures for Calculating Alms for
Individuals and Companies
c.
For investment companies; the amount of due alms should be
divided on the number of shares.
• Each investor then pays alms according to his shares.
A Guide to Accounting Zakah
Second Essay; Executive Measures for Calculating Alms for
Individuals and Companies
d. For partnerships of labor and capital;
• The labor pays alms according to his share of profits
• The financier pays alms on capital and the profit less the laborer’s
share
A Guide to Accounting Zakah
Second Essay; Executive Measures for Calculating Alms for
Individuals and Companies
Alms on money should be calculated according to the following steps:
10. Revenue from alms should be distributed according to its due
activities and persons in the light of the rules of Islamic Law.
A Guide to Accounting Zakah
Second Essay; Executive Measures for Calculating Alms for
Individuals and Companies
Alms money should be spent on the following:
1. The poor
2. The needy
3. Those who work in administering alms
4. Those whose hearts have been recently reconciled to the Truth
A Guide to Accounting Zakah
Second Essay; Executive Measures for Calculating Alms for
Individuals and Companies
Alms money should be spent on the following (continued):
5. To free slaves
6. Those who are in debt
7. In the Path of Allah
8. The wayfarers
A Guide to Accounting Zakah
Second Essay; Executive Measures for Calculating Alms for Individuals
and Companies
In order to calculate alms on money, an accountant needs the following tools
and methods:
1.
General balance (financial situation) made on the date of calculating alms
2.
Final accounts for the ended year on which alms are to be calculated
3.
Clarification concerning the balance and the final accounts
4.
The price of gold at the time when paying alms is due in order to
calculate the Nisab.
A Guide to Accounting Zakah
Second Essay; Executive Measures for Calculating Alms for
Individuals and Companies
5. Different monies possessed by the alms giver should be grouped if of
the same kind
6.
Different contemporary fatwas concerning alms
7.
The Guide for calculating alms
8.
Other accountancy tools and methods which may be useful for
calculating alms
A Guide to Accounting Zakah
Part 3
Accountancy Forms References
Simplified Accountancy Forms
• These forms are meant to be used as a guide for accountants when
assessing the receptacle of alms and when advising the alms giver
whether he is an owner of a personal establishment or a partner
with others in a private company or a shareholder in an investment
company
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on wealth in cash
• The receptacle of alms on cash wealth includes banknotes, coins, silver,
gold money and ingots of gold, current accounts in banks and investment
accounts
• The Nisab for cash wealth is 85 grams of pure gold, or its equivalent in
cash, or 595 grams of pure silver
• The Islamic Commission for Research has recommended to use the Nisab
in gold.
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on wealth in cash
The assessment and calculation steps are as follows:
a.
Define the time when alms are due, (AlHawl), which starts from the
time when the amount of money reaches Nisab
b.
Define all items of cash wealth, on which alms must be paid (alms
assets)
A Guide to Accounting Zakah
The assessment and calculation steps (Continued)
c.
Assess all items of cash wealth according to market value at the time
when alms is due
d.
Settle all due liabilities on the alms giver from his cash wealth so that
to know the receptacle of alms
A Guide to Accounting Zakah
The assessment and calculation steps (Continued)
e.
Compare between the receptacle of alms and the Nisab, if the
receptacle reaches the Nisab, then alms is due to be paid.
f.
Calculate the amount of alms by multiplying the receptacle by the
price of alms, which is 2.5%.
g.
See form on page 29 of Guide
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on goods for trading
and industrial activities
• What is meant by goods for trading is anything which is to be bought or
sold with the intention of trading to earn a profit
• No alms are due on goods obtained for personal use
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on goods for trading
and industrial activities
The assessment and calculation steps are as follows:
a.
Define the end of the alms year, which is the same date as the end of
the financial year for an establishment or company
b.
Define and assess the elements of alms assets such as goods, etc.
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on goods for trading
and industrial activities
c.
Define and assess the elements of immediate current liabilities which
are due for payment from the alms assets
d.
Define the receptacle of alms by deducting item (c) from item (b) and
add any earned money
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on goods for trading
and industrial activities
e.
Define the amount of the Nisab, and then compare with the receptacle
of alms
f.
Calculate the amount of alms. If the receptacle reaches the Nisab, then
alms should be paid as 2.5% if lunar year and 2.577% if solar year.
g.
See form on page 32 in Guide
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on agriculture and
fruits
• Agriculture is anything that comes out of the earth and is planted by
seeds from which man, animal, and bird feed
• Fruits is everything which trees carry which is to be eaten
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on agriculture and
fruits
• Alms on agriculture and fruits are due at the time of harvest or collecting
• If an area of land produces more than one crop within the year, its owner
should pay alms on each crop separately.
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on agriculture and
fruits
The following are the steps of assessing the alms on agriculture and fruits:
a.
Measure the total production of the land either by production or by
cash
b.
Define the expenses on the production, if the opinion adopted is that
which says that expenses should be deduced as far as they do not
exceed the third, which is the opinion of the Sixth Fiqh Seminar of
Barakah.
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on agriculture and
fruits
c.
Define the receptacle of alms by deducing item (b) from item (a).
d.
Define the amount of Nisab, which is the equivalent to 5 Awsaq, or the
equivalent to 50 Egyptian Kaylah, or 653 kg of wheat or the average
food for most people
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on agriculture and
fruits
e.
Calculate the amount of alms:
•
In the case of watering by cost alms = receptacle of alms X 5%
•
In the case of watering without cost, alms = receptacle of alms X
10%
See form on page 35 of the Guide
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on cattle
• Cattle includes camels, cows, and sheep
• Alms are due only if they are bred for multiplication and not used as
animals of burden
• Nisab for alms on cattle differs according to the kind of species
o For camels it is five, for sheep it is forty, whereas for cows it is thirty
o Refer to Fiqh books for more details
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on agriculture and
fruits
The following are the steps of assessing the alms on cattle:
a.
Define the number of cattle deducing the working animals and the
ones ready for trade
b.
Compare the number with Nisab, If it is less than Nisab then no alms
are due.
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on agriculture and
fruits
The following are the steps of assessing the alms on cattle:
c.
Define the category the number falls into, in order to define the
amount of alms due
d.
Define the alms due according to tables in Fiqh books
e.
See form on page 37 in the Guide
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on mineral and
marine wealth and minerals in the earth
• Mineral and marine wealth include anything of value which is brought
out from the earth or the bottom of rivers, seas, or oceans
• Minerals in the earth (Rikaz) are treasures which are buried in the earth
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on agriculture and
fruits
The following are the steps for defining the receptacle of alms on mineral
and marine wealth:
a.
Define the net production from the earth or sea, on which alms must
be paid
b.
Compare the net production with the Nisab (85 grams of gold) in he
case of minerals of wealth. For Rikaz there is no Nisab.
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on agriculture and
fruits
c.
Calculate the amount of alms, if the receptacle reaches the Nisab, on
the basis of 2.5% for minerals and 20% for Rikaz
d.
See form on page 39 of the Guide
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on revenue of
investment assets
• Investment assets are any assets which remain fully owned whilst
revenue from investing them are reoccurring, such as real estate, cars,
and others
• No alms are due on the assets, however alms are due on the revenues
once they reach Nisab after deducing actually paid expenses and debts
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on revenue of
investment assets
Receptacle of alms on investment assets is calculated according to the
following steps:
a.
Define the total annual revenue at the end of the year
b.
Define all expenses of getting the revenue
c.
Deduce the expenses from the total revenue to get net revenue
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on revenue of
investment assets
d.
Deduce currently due debts which the alms giver must pay
e.
The net of all of the above should be added to any cash and trade goods
owned by the alms giver in which no alms were paid at the end of the year to
ascertain the receptacle of alms
A Guide to Accounting Zakah
Accountancy form to assess and
calculate alms on revenue of
investment assets;
Receptacle of alms on investment assets is
calculated according to the following steps;
f.
g.
Compare the receptacle (e) with the
Nisab which is the equivalent to 85
grams of gold, if the receptacle
reaches the Nisab, then alms should
be calculated on the basis of 2.5%,
which is the chosen opinion of the
present guide.
See form on page 42 of the Guide.
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on revenue from
work
• This category includes wages, salaries, income from freelance work and
won money
• Alms must be paid on what remains of this money at the end of the year
by adding it to other monies owned by the alms giver when calculating
the Nisab and the alms year
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on revenue from
work
The steps to define the receptacle of alms and calculate what is due at the
end of the year are:
a.
Define what remains from the revenue at the end of the year after
deducing what is paid from cost of basic need and after paying
outstanding debts
b.
Compare step (a) to Nisab (85 grams of gold) to know whether alms
are due or not
A Guide to Accounting Zakah
Accountancy form to assess and calculate alms on revenue from
work
The steps to define the receptacle of alms and calculate what is due at the end of
the year are:
c.
Calculate the amount of alms if the receptacle reaches the Nisab on the basis
of 2.5%
d.
See form on page 44 of the Guide
e.
See page 45 of the guide to determine alms on freelance work
f.
See page 46 for form for freelance work
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