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Homework answers / question archive / has provided capital to Asnaf Maju Sdn
of musharakah mutanaqisah amounting to RM500,000 for a project. Profit and loss
sharing ratio as agreed by both parties is 40:60 (Bank:Customer) at the beginning of the
contract. The Bank and Asnaf Maju Sdn. Bhd. have also agreed for the profit-sharing ratio
to change to 30:70 for year 3 and 4. The repayment shall be equal throughout the
contract period.
However, Asnaf Maju Sdn. Bhd. has financial difficulties during year 2 and thus only
managed to pay 50% instalment on the capital for that year. The entrepreneur also faced
with financial difficulties in year 4 whereby the repayment outstanding is amounting to
RM 10,000 at the end of the contract.
The profit and loss for the above project is as follows:
Year 1 Profit of RM90,000
Year 2 Loss of RM40,000
Year 3 Profit of RM120,000
Year 4 Loss of RM50,000
a) You are required to prepare extract of journal entries from the beginning until the
end of the contract to record the recognition of asset and profit/loss of musharakah
mutanaqisah financing provided by Bank Faisal Berhad based on the following
recognition methods:
i. Accrual basis
ii. Cash basis
(50 Marks)
b) Discuss about the cash basis and accrual basis approaches in recognition of profit or
income in the contract of Musharakah?
(10 Marks)
