As an Accountant i have question that how to calculate Zakat of the Partnership or Sole proprietor Company`s at the end of the Financial year.
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Assalam
Walekum Wa
Dear
Burhan Bhai
I pray
for u that Allah will keep u always Happy and Healthy. Amin
As an
Accountant i have question that how to calculate Zakat of the Partnership or
Sole proprietor Company`s at the end of the Financial year. and the Financial
report is showing the Accumulated Profit every year too. Is it on the basis of
the net working capital or only on the Current Profit & Loss account ( if
company is making Profit or if Loss then)?
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Answer:
Zakah determination earnings
In the name of Allah, We praise Him, seek His help and ask
for His forgiveness. Whoever Allah guides none can misguide, and whoever
He allows to fall astray, none can guide them aright. We bear witness that
there is none worthy of worship but Allah Alone, and we bear witness that Muhammad
(saws) is His slave-servant and the seal of His Messengers.
Every believer, regardless of whether man, woman, or
child, who has excess wealth (over the ‘nisaab which is appx US$1,000.00) of
their own, is liable to pay a 2.5% annual zakat of their nett excess wealth in
Shariah.
Zakat is not determined from one’s earnings or profits,
but rather on one’s net excess wealth which is left over after paying all their
expenses, and it has been in their possession for a period of one calendar
year. There is no zakah liable on the house one lives in, or the furniture and
fixture one uses in their house, or the car one drives, etc. But if one has property which one has bought
as an investment, or spare vehicles other the one one drives, or jewelry, or
any other excess asset…then zakah would be liable on these excess wealth and
property.
Any asset, or wealth, or cash, or savings, which are left
over after all of one’s expenses are paid, and that excess savings and wealth
has been in their possession for one full calendar year is liable for payment
of annual ‘zakat’ at 2.5% of its value.
Your Question: As an
Accountant i have question that how to calculate Zakat of the Partnership or
Sole proprietor Company`s at the end of the Financial year.
If one has a ‘sole proprietorship’ business, zakah would
be calculated on the total nett assets of the business (plus whatever excess
personal assets one might have), which would be:
Total Assets of the Business (-minus) Total Liabilities of
the Business = Total Nett Assets of the business.
If one is say a 50% partner in the business, then one is
to pay zakah on 50% of the Total Nett Assets of the business at the rate of
2.5% annually, being his share of Partnership in the business.
Your Question: ……and
the Financial report is showing the Accumulated Profit every year too. Is it on
the basis of the net working capital or only on the Current Profit & Loss
account ( if company is making Profit or if Loss then)?
Zakah is not an ‘income’ tax; but the right of the poor
Allah Subhanah has kept in the excess wealth of the rich. Thus regardless of whether a company makes a
financial profit or loss in the financial year, as long as the company has nett
assets, one would be liable to pay 2.5% annually of the total nett asset value
of the business.
The ‘Accumulated Profit’ would obviously be in included in
the Assets of the Company in the ‘Balance Sheet’.
The ‘Working Capital’ would be the cash or credit
available to the Company to transact its business; thus one is liable to pay
zakah only on the ‘Working Capital’ amount which is actually owned by the
Business; which again should be included in the Assets column of the Company’s
Balance Sheet.
The ‘Income Statement’, or the profit or loss the business
makes in the current financial year has absolutely no direct bearing on the
calculation of zakah; for zakah is calculated from the Balance Sheet as:
Total Assets of the Business (-minus) Total Liabilities of
the Business = Total Nett Assets of the business.
Even if a company makes a loss in its current year, as
long as the company has Nett Assets, it would be liable to pay zakah annually
on its Total Nett Assets.
Whatever written of Truth and benefit is only due to
Allah’s Assistance and Guidance, and whatever of error is of me alone. Allah Alone Knows Best and He is the Only
Source of Strength.
Your brother and
well wisher in Islam,
Burhan
Wister