A Methodology for the Accounting of in-kind Zakat: The Sudanese Chamber of Zakat

Abstract

This study is an attempt to tackle a real, looming, problem facing the Sudanese Chamber of Zakat. The problem is that, there is a long-standing dispute, arguments-and-counter arguments on the classification of the collection (Al-Gebaaih) costs of in-Kind Zakat, namely; the in-Kind Zakat of agricultural products (Al-Zooroa) and In-Kind Zakat of livestock (Alanaam). The debatable costs comprise the material costs of grass, sacks, animal drugs, cattle keeping sheds and hangars and the likes, and the labor costs of veterinary care, up-loading and down-loading, store keeping to mention a few. The Executive Administrators of the Chamber classify these costs as capital expenditures. According to their argument, these costs actually add-value to the collected agricultural products and livestock. On contrary, the Chamber Board of Trustees (the Supervisory board of the Chamber) and the legislative bodies reject -all together- the classification of these costs as capital expenditures, but, instead, they classify them as administrative expenses. On the basis of this argument, the Boards reckon that the administrative expenses of the Chamber are inflated.
However, when exploring the scope and depth of the problem, it’s observed that, the problem is wider in its scope and deeper than it’s initially believed. It’s found that, the Chamber had no specific accounting methodology to, in monetary terms, measure and disclose the in-kind Zakat. The lake of methodology had resulted in a numbers of problems, in addition to the costs classification problem, such as that, the whole in-kind Zakat is, in monetary terms, outside the accounting cycle. Moreover, it’s found that the Chamber did not prepare and disclose financial statements. To tackle these problems, the Study proposed an accounting methodology, on the basis of the Jurisprudence and the requirements and the IFAS No. (1), (41), for the accounting of entire process of classifying, valuating, measuring and fully disclosing, in monetary terms, the in-kind Zakat from the moment it’s receipt by the Chamber and along the whole way till it’s receipt by the end-user. In accordance to this methodology, the study has analyzed the cost structure of the collection, storage and distribution of in-Kind Zakat. The analysis revealed that, collection costs are neither pure Capital expenditures nor pure administrative expenses; instead, they contain some items of both Capital expenditure and administrative expenses. Accordingly, the study classifies the collection capital expenditure as prime costs which include the direct material costs and direct labor costs that are inevitable for the collection of in-kind Zakat. The Study suggested financial statements for the Chamber to be prepared on hybrid-basis instead of cash-basis. Finally, the study suggested some recommendations to enhance the efficiency of the financial management of the Chamber. The study points to its own limitations.