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The bank's client has a strong incentive to report less profit to the bank than it has actually earned, as it will lose a fraction of that to the bank. As the client knows more about its business, its accounting, its flow of income, etc., than the bank, the business has an informational advantage over the bank determining levels of profit.
(For example, one Islamic bank—Al Rayan Bank in the UK—talks about "Fixed Term" deposits or savings accounts). [172] In both these Islamic and conventional accounts the depositor agrees to hold the deposit at the bank for a fixed amount of time. [173] In Islamic banking return is measured as "expected profit rate" rather than interest. [174 ...
Sankey Diagram - Income Statement (by Adrián Chiogna) An income statement or profit and loss account [1] (also referred to as a profit and loss statement (P&L), statement of profit or loss, revenue statement, statement of financial performance, earnings statement, statement of earnings, operating statement, or statement of operations) [2] is one of the financial statements of a company and ...
From the point of view of depositors, "Investment accounts" of Islamic banks – based on profit and loss sharing and asset-backed finance – play a similar role to the "time deposits" of conventional banks. (For example, one Islamic bank – Al Rayan Bank in the United Kingdom – talks about "Fixed Term" deposits or savings accounts). [352]
The industry has been praised for turning a "theory" into an industry that has grown to about $2 trillion in size; [6] [7] [8] for attracting banking users whose religious objections have kept them away from conventional banking services, [9] drawing non-Muslim bankers into the field, [2] and (according to other supporters) introducing a more stable, less risky form of finance.
A balance sheet reports on a company's assets, liabilities, and owners equity at a given point in time. An income statement reports on a company's income, expenses, and profits over a stated period. A profit and loss statement provides information on the operation of the enterprise.
To review and amend accounting and auditing standards for Islamic financial institutions; AAOIFI carries out these objectives in accordance with the precepts of Islamic Shari'a which represents a comprehensive system for all aspects of life, in conformity with the environment in which Islamic financial institutions have developed.
a return varying according to the success of the project(s) the bank financed: for commercial finance the primary mode (in theory) of Islamic finance—called profit and loss sharing—would replace interest with risk sharing between the investor, the banker and the entrepreneur of the project being financed, much like venture capital financing.