Islamic accounting is much more holistic in real life rather than conventional accounting. It can be defined as an accounting’s framework which demanded to follow the Islamic rules or law and must apply the Shari’ah compliant guidelines in it through the development of our Islamic economics. The applications of the Islamic accounting must be clear and free from any unlawful or prohibited things as indicated in the holy Quran.
Islamic accounting practices altruism which is no concept of self-interest while concerning on the well-being of the other. Islamic accounting works with these two basic principles which are justice and benevolence. We need to ensure that everything involving the Islamic financing activities must be managed with justice without any exploitation according to the Islamic rules and regulations. Benevolence is such a commendable behaviour in Islam because it is what Prophet Muhammad practices in his life. By applying this, the procedures will run smoothly and would be much easier to meet the public’s requirements.
Shariah regulations prohibit riba’ and also known as usury. It is defined as an additional payment charged to the total amount of debts or loans. Goods or services provided which is in contrary to the Islamic principles such as pork and liquor is also considered haram in other means sinful and prohibited.
Due to the rapid development in Islamic economics, a financial institutions was established in 1990 called as Accounting and Auditing Organizations for Islamic Financial Institutions (AAOIFI). It is a non-profit organizations based in Bahrain with a purpose to control and promote Shari’ah compliant financial institutions.