A Guide TO Zakat Accounting Prepared by Dr. Hussain Hussain Shehatah Professor of Accounting Faculty of Commerce, Al-Azhar University Consultant to Al-Zakat Funds
Zakat in The Holy Quran قال الله تبارك و تعالي : ” و أقيموا الصلاة و أتوا الزكاة و اركعوا مع الراكعين ...“ ( سورة البقرة : الآية 43 ) Allah says : “ and be steadfast in prayer ,practice regular Zakat and Bow down Your heads with those who down ….. ( Al-Baqara- 43 )
Zakat in THe Sunnah قال رسول الله صلي الله عليه وسلم : ” بني الإسلام علي خمس , شهادة أن لا إله إلا الله , وأن محمدا عبده ورسوله , وإقام الصلاة , و إيتاء الزكاة , وحج البيت , و صوم رمضان ” ( رواه البخاري ومسلم )
Zakat in Sunnah-cont. The Messenger of Allah”( peace be upon Him ) said : “ Islam has been built on five pillars , Testifying that there is no God but Allah and Mohammed is the messenger of Allah, performing the prayers, paying the Zakat, making, the pilgrimage to the house of Allah , and fasting Ramadan “ ( Buhkary and Muslim )
Zakat Accounting Topics( Contents of the Book ) This Book deals with Fiqh and Accounting of Zakat (Alms) according to Islamic Jurisprudence . It consists of the following Topics : - Zakat Rules.( Fiqh ) . - Zakat Accounting Rules( Principles ). - Zakat Accounting Statements. - Zakat Duers.
Chapter One Zakat Rules (Zakat Fiqh)
Zakat Meaning Zakat means , in Language , : Blessing, Purity, Growth and Uprightness . It means in Shariah :a defined allocating amount from a defined money for an assigned people .
Zakat and Sadaqa Zakat may called Sadaqa , Allah says :” of their properties ( money) take Sadaqa , that may Purify and sanctify them and pray on there behalf……..” “خذ من أموالهم صدقة تطهرهم و تزكيهم بها وصل عليهم * -The Word Sadaqah in this verse refers to Zakat . But it sometimes refers to Charity .
*-Accordingly , every Zakat is a Sadaqa And a Sadaqa may be a Zakah or a Charity .
Zakat Rulesأحكام الزكاة Muslim Scholars have summarized Zakat Rules as follow : - Zakat is a Farida from Allah (obligatory ). - Zakat is a Financial Worship . - Zakat is a Believe . - Zakat is Compulsory to Muslims. - Zakat is Due to an assigned Receivers.
- Zakat is Annuity , except Zakat on Plants and Fruits , and on Rakaz . - No Zakat until Wealth exceeds Nisab - No Duality in Zakat. - Zakat affairs are the Responsibility of Government.
- Due Zakat does not obsolete . - Zakat is Obligatory to Muslims any where in the world. • -The Muslim who denies the Obligatory • of Zakat is a Non-believer ( Kafir) , • and who refuses to pay it , is a Disobeyer. • -
Zakat and Tax Differences -Zakat is a financial Worship ,and a pillar of Islamic Religion , but Tax is imposed by the Government by Low ragardless to Religion. - Zakat is based on Religious and Ethical Values ,but Tax mostly ignores such Values and based on monetary factors .-
- Zakat is calculated according to Fiqh Rules , but Tax is calculated according to Governmental Rules.
Zakat and Tax Differences • - Zakatable wealth is gained from Good and Halal Sources, but Tax Revenues and Incomes may be earned from Non-Halal and Worse Sources from the sight of Islam Rules .
- Zakat Rules are stable and permanent for each Time and place because they excreted from Quran and Sunnah ,while Tax Rules are variable. - Zakat purifies soul and money ,while Tax does not .
Accordingly ,: Tax is not a Zakat Zakat is not a Tax
Zakat Accounting Meaning It mans the calculation, reviewing and announcing of Zakat on money .It is governed by a group of Accounting rules, extracted from the sources of Islamic Shari’ah,
Zakat Accounting Objectives They are as follow: - Determining the Zakat Base . - Calculating the Due amount of Zakat . - Preparing Zakat Statements and Reports . - Distributing Due Zakat amongst its Duers.
ZAKAT ACCOUNTING RULES( PRINCIPLES ) Zakat Accounting Rules are as Follow:
Zakat is calculated according to the lunar year. Counting starts when the amount of money attains the Nisab (the minimum amount on which Zakat should be paid). This includes all kinds of Zakat except Zakat on agriculture, fruits, mineral assets and Rikaz (metals found in the earth). 1. The Lunar Year
2. Independence of each Year: Each Zakat year is an independent one, and Zakat on a given amount of money should not be more than once in the same year. Duality should be avoided. The Prophet (Peace be upon him) said: “No duality in Zakat giving”.
3 Actual or Assumed Growth: Actual or assumed growth of an amount of money is a condition for any Zakat is to be given from this money. Therefore, Zakat is not due on fixed assets or things for personal use. This is because the condition of actual or assumed growth would not be met.
4. Zakat Base should reach Nisab Zakat is due on money which is abounding (more than basic needs). No Zakat is 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.
5. Calculating Zakat on the Total or Net Zakatable Money For every kind of money or activity there is a rule for calculation Zakat which is due on it. Some are calculated in relation to the total amount and others are calculated in relation to the net amount ( Property).
6. Grouping Money of the Same kinds together as Zakatable Base: 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 Zakat Year.
7. Evaluating Zakatable Money according to the Current value . Evaluating cash money of wealth and cash money from offers of commerce to define the due Zakat should be according to the current value at the time of paying Zakat. They should not be evaluated according to the historic value, cost or market, whichever is less.
Receptacle of Zakat = Zakat Base = Zakatable Money • ( Assets),( Less ) - Zakatable Liabilities which are due to be paid at the moment.
2. Zakatable Money( Assets )= Assets which meet the conditions of obligatory Zakat. 3. Zakatable Liabilities = which are due in short time. 4. Due Zakat = Zakat Base By Zakat Rate
Conditions of Zakatable Money They are as follows: a. It should be a full ownership. b. It should be Growing actually or assumed
c. The completion of one Lunar Year except for Zakat on agriculture, fruits, mineral wealth or Rikaz in earth.
d. Not other kind of Zakat has been paid on the same Zakatable Money within the same year. e. Zakatable Money should exceeds Basic Needs.
f. Zakatable Money should not include a Debt which is due at the time.(short term Debts) g. Zakatabe Base should reach the (Nisab).
Conditions of Zakatable Liabilities They are Short Term Liabilities which are due payment according to the following conditions : a. Liabilities should be related to the activity.
b. Liabilities should be due payment during the coming year. c. Liabilities should be legally permissible.
Nisab = the minimum amount of Due Zakat It is equal to 85 grams of pure gold. A gramshould be evaluated according to current prices at the time of paying Zakat in the country in which the original money is located.
The Amount of Due Zakat When Zakat Base money once reaches the Nisab , the Due Zakat is calcuated as follow : Zakat Base x the price of Zakat.
The Price of Zakat = Zakat Rate It varies according to the kind of money and activity. It ranges between 2.5% and 20% of Zakatable Base.
Steps of Calculating Zakat ( Zakat Accounting Procedures )
Zakat should be calculated accordingto the following steps: 1. Defining the date completion the Lunar year. This date varies according to the circumstances of the Zakat giver ( Payer).
With the exception of Zakat on agriculture, fruits, minerals and minerals in the earth. In these cases Zakat should given at time of harvest or the acquisition of the minerals.
In the case of defending the Lunar year for the first time, the date of beginning and the date of completing should be defined according to the date of reaching the Nisab amount.
2. Different Monies owned by the Zakat Payer should be assessed at the end of year according to the rules of Zakat. From this money it should be defined on which Zakat must be given. They are called Zakatable Money ( Assets).
3. Assessment of Taxable Liabilities (deductions) which are due to be deducted from Zakatable money according to the rules of Zakat.
4. Defining the receptacle of Zakat ( Zakat Base ) by the deduction of Due Liabilities from Zakatable Money by the following equation. The receptacle of Zakat ( Zakat Base ) = Zakatable Money – Due Liabilities.
5- Calculating the Nisab as mentioned before. Each kind of Zakat has a special Nisab .
6. A comparison should made between the Zakat Base, defined in step 4 above, with Nisab defined in step 5. So as to know whether Zakat is due or not. If the Zakat Base has reached the amount of Nisab, then Zakat would be Due.