Homework Assignment Chapter 9 Musyarakah

Bank HSBC Islamic Berhad entered into a Musharakah agreement with Umar, a Muslim entrepreneur providing capital of RM700,000 on 1st of Muharram 1422. Umar provided a capital of RM300,000. Since Umar was the managing partner, it was decided that the profit sharing ratio of the Musharakah venture was 45:55 (45% for the bank). The financial year was to follow the Hijra calendar year.

The profit and loss for the above venture was as follows:

Year 1: Profit of RM70,000

Year 2: Loss of RM50,000

Year 3: Profit of RM150,000

Year 4: Loss of RM60,000

Year 5: Loss of RM200,000

The bank share of the profits in year 1 and year 3 was duly paid to the bank at the last day of the financial year. At the end of year 5, the bank decided to terminate the agreement and it was agreed that the loss of RM80,000 of the RM200,000 in year 5 was due to the negligence of Umar. At the end of the year 5, Ali had still not paid the balance due to him. Zakat at 2.5% was to be paid on the profits by each partner on his share of the profits by himself.

Questions:

1. Provide the journal entries of the transactions for the 5 years in the book of Bank HSBC Islamic
2. Provide the extract of the balance sheet and income statements of Bank HSBC Islamic in respect of the above transactions