has provided capital to Asnaf Maju Sdn. Bhd. based on the pr

Share With

has provided capital to Asnaf Maju Sdn. Bhd. based on the principles

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

Related Questions