The Difference in Accounting System of Sharia Insurance and Conventional Insurance
The difference in accounting system of Sharia Insurance and Conventional Insurance
The concept of Islamic accounting and accounting of conventional nature and have different characteristics. Accounting basics: for the Islamic sharia was implemented among the muslim community, the process is handled by the accountants who combine the capabilities and skills of work with honesty. Based on the understanding of the Islamic Foundation, and the principles of Islamic accounting and information above, we can deduce the nature of the specific Islamic accounting including the following. :
• Basic accounting norms of Islam is derived from the Qur'an and Sunnah and Fiqh scholars
• Accounting of Islam enshrined the rule of the strong, faith, as well as the recognition that God is God, Islam is a religion, Muhammad is the Apostle, and also believe in the last day.
• Accounting of Islam based on the good morals. Therefore, a process of implementing accounting accounting should be able to have a trustful, honest, neutral, fair, and professional.
• In Islam, an accountant is considered responsible in front of the community and Muslims about how much economic unity that is affected by Sharia law, especially with regard to muamalah.
• Based on the privileges that are rules and morals in Islam also, accounting related to financial processes.
• Accounting in Islam is concerned aspects of behavior as an element and also plays a role in economic unity.
In the accounting system of Sharia has some differences with conventional accounting accounting system. Mohamed Arif bin Abdul Rashid, CEO of PT Syarikat Takaful Indonesia, in Eccounting Concept In Takaful Business explains some of the difference is as follows:
a) Cash Bases
In conventional accounting practices, insurance premiums are recognized as revenue, even though the insurance premium has not been paid. While the accounting practices in takaful or Islamic insurance, or installment premiums and profit from an investment is truly recognized as revenue if the companies have received it in cash. This accounting practice has an important meaning related to the business system berperinsip on the mudharabah contract which binds between the participants with the company in a deal for the results.
b) Technical Reserve
Technical reserves is part of the insurance premiums that have not been generated or is known as premium reserves that have yet to be produced. In takaful accounting system, backup techniques is calculated by using the 1/365 method. Premiums will be recognized as income as well as determined according to the actual number of days during the accounting period and the period of the agreement/contract Tafakul. The premiums were not used during the duration of the agreement is considered a backup. Read: Principles of Insurance and Elements of Insurance Contract
c) load Retakaful
In conventional insurance practice load during the reinsurance treaties, recognized as the initial insurance dikover. This accounting practices in accordance with the accepted standards, i.e. the comparison of revenue with the burden that occurs during walking. In Takaful accounting system, the burden of retakaful Treaty during the period are recognized as debt until it is paid in installments or Takaful premiums by participants. However, the load will be recognized as this retakaful income juika whole premiums paid in advance by participants.
d) Surplus (life insurance)
In conventional insurance, investment of surplus ditrasfer to the shareholder as income. However, in family Takaful (soul), the company is not entitled to recognize this as a surplus of income. On Takaful family only profit from investment funds were shared between the participant and the company is exchanged (e.g. 70:30 or 60:40). After deducting the portion of profits for the company, the rest of this profit is income for participants of Takaful who dikreditan kerening participants.
e) Surplus (On Insurance)
Profit from the General Takaful (losses) are distributed based on the ratio of profit which has been agreed between the company and participants of Takaful. Benefit is payable if the participant is still bound to tafakul the agreement or contract. The technical aspects of insurance accounting, Tafakul describes the added value or profit expressed in a fair and transparent. So, neither the company nor the participants of insurance tafakul not feel aggrieved. Another advantage is that the existence of long-term values of community, tolong-menolong, and menaggung each other if among the participants happen to claim a loss. This is the side the possibility of Takaful insurance.