Al-Ain Islamic Bank provided financing of USD 4,000,000 to a client under a multi-period Mudaraba contract. During

Question:

Al-Ain Islamic Bank provided financing of USD 4,000,000 to a client under a multi-period Mudaraba contract. During the first year of operations, the Mudaraba earned a profit of USD 500,000.

The profit-sharing ratio between the bank and the client is 80% and 20%, respectively. The bank received its share of the profit from the client on December 31, 2022. What journal entry will the bank pass to record the profit?

a. Debit: Cash/Bank (Asset) = USD 400,000 Credit: Mudaraba Financing (Asset) = USD 400,000

b. Debit: Mudaraba Financing (Asset) = USD 400,000 Credit: Cash (Asset) = USD 400,000

c. Debit: Cash/Bank (Asset) = USD 400,000 Credit: Mudaraba Profit (Income) = USD 400,000

d. Debit: Mudaraba Financing (Asset) = USD 400,000 Credit: Mudaraba Profit (Income) = USD 400,000

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Financial Reporting For Islamic Financial Institutions Accounting Standards Interpretation And Application

ISBN: 9781032464022

1st Edition

Authors: Abdul Rauf Mahar, Ayesha Bhatti, Muhammad Junaid Ashraf, Asfand Zubair Malik

Question Posted: