Question: This is query for clarifications on zakaat
calculation for business. To our knowledge, we calculate zakaat
annually as per info on company annual balance sheet, that is zakaat = current assets – (less) current liabilities. The details for current assets and current liabilities
of my company for which I work are as follows: Current Assets Cash on hand Cash at Bank Trade Accounts Receivable (Debtors) Prepayments Advance Payments Advances - Loan (if any) Inventories – this includes physical inventories at
cost and Goods in transit Current Liabilities Bank Overdrafts Trade Accounts Payable (Creditors) Advances – Loan (if any) Other payables and Accrued Liabilities Advances - Loan (if any) Provisions for Employee Entitlement (sickleave, annual leave entitlement at balance date) Provisions for Income Tax Dividend Payable When calculating zakaat that
is current assets less current liabilities, we also take into account
re-calculating inventories at market value since balance sheet shows
inventories at cost. 1. We replace inventories at cost value with
inventories at market value for zakaat calculation
purpose only. Confirm? 2. Inventories value in balance sheet includes
Goods in Transit as advised by Chartered Accountant. Goods in Transit are goods
not received but overseas suppliers have shipped the goods and it
is on the way before and at balance date. A separate journal entry is passed at
the balance date; Dr Inventories Cr Creditors. And this entry is reversed the
following Financial period and new Goods in transit value is picked up for new
Financial period. i) The questions arises will this Goods in
transit be taken for calculating zakaat? ii) If yes, will we have to recalculate Goods
in transit value at market value? 3. Verify the details given for current assets
and current liabilities. Confirm these are ok in regards to zakaat
calculations. 4. Provide more notes if available in regards
to business zakaat calculations. Your response to above will be highly appreciated. Answer: بِسْمِ اللهِ الرَّحْمنِ الرَّحِيْم In the Name of Allah, the Most Gracious, the Most Merciful. 1) Yes, the market value of
inventories (merchandise) must be used for zakat calculation purposes. 2) i)
Once the company buys some goods (for resale), the company immediately becomes
the owner thereof and must pay zakat on them (i.e. if they are still in the
company's ownership on the zakat anniversary). This is regardless of whether or
not those goods have been delivered and received. ii) The market value
of the goods must be used for zakat calculation purposes. 3) Assets: - Please explain: a) Prepayments;
b) Advance payments. - By “advances”, do you mean the
amount the company is owed? If yes, then it is fine. - All the other assets are
fine. - Note: As mentioned
above, the market value of inventories (merchandise) must be used for
zakat calculation purposes. Liabilities: - By “advances”, do you mean the
amount the company owes? If yes, then it is fine. - The amount that the employees
will be entitled to in the future (incl.
salary, sick-leave entitlement etc.) is not a liability for zakat
calculation purpose. However, the amount that has already become payable (i.e.
on the zakat anniversary) to the employees will be counted as a liability for
zakat calculation purpose. - The amount that will have to be
paid in the future as income tax is also not a liability for zakat
calculation purpose. However, the amount that has already become payable
(i.e. on the zakat anniversary) to the government as income tax will be counted
as a liability for zakat calculation purpose. - Regarding, dividend see answer
no. 4. - What is meant by “Other payables
and accrued liabilities”? -All the other liabilities are
fine. 4) If there are multiple owners of
the company, each co-owner will be responsible to pay zakat on his share of the
zakatable assets (minus his share of the liabilities) of the company. If there
are shareholders, they are also co-owners of the company and they must pay
zakat on their share of the zakatable assets (minus their share of the
liabilities) of the company. And
Allah Ta'ala knows best Mufti Faizal Riza Darul Ifta
Australia |
Darul Ifta Australia answers questions pertaining to Shariah. Thereafter, some of these questions and answers are placed for public view on www.fatwa.org.au for educational purposes. However, many of these answers are unique to a particular scenario and cannot be taken as a basis to establish a ruling in another situation or another environment. Darul Ifta Australia bears no responsibility with regards to these questions being used out of their intended context.
- The Shariah ruling herein given is based specifically on the question posed and should be read in conjunction with the question.
- Darul Ifta Australia bears no responsibility to any party who may or may not act on this answer and is being hereby exempted from loss or damage howsoever caused.
- This answer may not be used as evidence in any Court of Law without prior written consent of Darul Ifta Australia.
- Any or all links provided in our emails, answers and articles are restricted to the specific material being cited. Such referencing should not be taken as an endorsement of other contents of that website.