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These are the liabilities of Companies or Establishments due to others. They include long and short term loans, creditors, notes payable, bank accounts (overdrafts), mature expenses, prepaid revenues, due taxes, prepaid guarantees, dividends payable and the like.

1. Long-term liabilities

Standard accounting definition and evaluation:
These represent liabilities on the Establishment or the Company's part to others whose payment date is not less than a fiscal year, such as the long term loans, documents and notes payable. They are evaluated on the basis of the face value, which may include interest if it has not been paid yet. These liabilities are divided among the ownership rights and the exchanged commitments.

Evaluation and legal judgment:
Generally, liabilities are evaluated on the basis of the face value. The legal judgment differs according to the ways these liabilities are used. This goes as follows:
a . If the due long-term liabilities or the due installment thereof were used to finance goods or any of the items of the current assets, all these are to be subtracted from the assets liable to Zakah in case the Establishment or the Company does not have surplus fixed Zakah assets exceeding their basic needs in order to meet these commitments.
b . If the fixed commitments are used to finance fixed assets, the due installment will be subtracted from the Zakah assets. While it will not be subtracted if its repayment date is not due until after the end of the fiscal year.
In all cases, the due installment of these commitments is subtracted from the Zakah assets.

2.Short-term liabilities

Standard accounting definition and evaluation:
These are the due commitments that must be repaid in a short time, usually not more than a year, such as creditors and notes payable, and the like.

1. Creditors

Standard accounting definition and evaluation:
These are the due commitments payable to the suppliers in a short time, usually not more than a year. The basis of credit in most cases stems from buying the goods and the requirements of operation and production. The creditors are evaluated on the basis of the face value by the end of the fiscal year.

Evaluation and legal judgment:
Creditors are evaluated on the basis of the face value of the credit. These are deemed as part of the due short term commitments that are subtracted from the assets liable to Zakah.

2. Notes payable

Standard accounting definition and evaluation:
Notes payable stem from either bills or license documents, and they represent liabilities to the suppliers who provide the Establishment with goods. These papers usually become payable in a short period not more than a year. The notes payable are evaluated on the basis of the face value at the end of the fiscal year.

Evaluation and legal judgment:
Notes payable are evaluated on the basis of their face value as stated on the notes. They are regarded as short term liabilities that are subtracted from Zakah assets. If they contain a late interest penalty, it will not be subtracted. According to Islam, it is not deemed a sound, rightful and payable debt.

3. Loans and overdraft accounts at Banks and Lending Institutes

Standard accounting definition and evaluation:
These are amounts of money taken as a loan by an Establishment or Company from banks or lending institutions, and are payable in one year or less. Loans and the current credits are evaluated on the basis of their face value at the end of the fiscal year.

Evaluation and legal judgment:
The short term commitments due are evaluated on the basis of their face value and are subtracted from the assets liable to Zakah. If they were to contain banking interests, this would be subtracted. According to Islam, such debts are not deemed sound, rightful and payable debts.

4. The expenses due

Standard accounting definition and evaluation:

These are the expenses that pertain to present fiscal period whose pay back is expected to take place in the next fiscal year. These expenses due are evaluated on the basis of their face value at the end of the fiscal year.

Evaluation and legal judgment:
Expenses due are evaluated on the basis of their face value and are subtracted from the assets liable to Zakah for they are regarded as a kind of short term commitments due.

5. The revenues received in advance

Standard accounting definition and evaluation:
These revenues are amounts of money already received in the present fiscal period but belong to the next or forthcoming fiscal period. They are evaluated on the basis of their face value, for they are regarded as commitments due upon the Establishment or the Company to others in return for exchange contracts for manufactured goods or services that will be available later on.

These revenues are evaluated on the basis of their face value without any increase or decrease. Its legal judgment differs in accordance with the prescribed dates as follows:

a. If the revenues received in advance are part of the price of goods that have not yet been delivered (and these goods were not included in Zakah assets) this revenue would not be subtracted. But if the goods were included in the Zakah assets, this revenue would be subtracted.

b. If the revenues received in advance are part of payment for services that have not been delivered to others, it would be regarded as a debt due to others. Hence, it would be subtracted from the assets liable to Zakah. This revenue is not completely owned as it is possible to break this service agreement for certain reasons.

6. Dues related to others

Standard accounting definition and evaluation:
These are amounts of money due, such as payments to tax department and social insurance and others due to various requirements. Thus, they are regarded as commitments that must be paid. These are evaluated on the basis of their face value and any amounts in the form of interest or late penalties interest may be added thereto.

Evaluation and legal judgment:
These amounts are evaluated on the basis of their face value without adding late penalties thereto if there were any. Also, they are regarded as commitments due that are subtracted from the assets liable to Zakah.

7. Proposed dividend distributions

Standard accounting definition and evaluation:
These are monetary distributions that have been agreed upon by the Company's board of directors on a given date, but have not yet been seconded by the general meeting of shareholders in order to execute the distribution process. These are evaluated in accordance with the amounts of money stated in the board of directors' proposal. In addition, they are stated in the budget under the heading of 'proposed annual profits'.

Evaluation and legal judgment:
These dividends are evaluated on the basis of their face value as stated in the profit distribution statement. They are not subtracted from the Company's assets liable to Zakah, because shareholders did not approve them. Zakah would not then be due from the shareholders.

8. Profits of investing Companies

Standard accounting definition and evaluation:

Profits of investment Companies means the net profits at the end of the fiscal period when the activity has been continuous and the profits are divided between the investors of capital and the investment Company in accordance with what they both agree.

Evaluation and legal judgment:
Zakah is to be taken from the investment Company and the investor of the capital is held responsible for paying it. The share of the profits of the speculator of the capital (the work owner) is treated exactly as the commitments due to be subtracted (i.e., the speculator's share of the profits is subtracted upon calculating the base of the speculation Company).

9. Guarantees paid by clients

Standard accounting definition and evaluation:
These guarantees are commitments due to others with a Company used as insurance or guarantee to fulfill and carry out certain projects. They are evaluated on the basis of the register value.

Evaluation and legal judgment:
These are evaluated on the basis of the face value and are deemed as the due commitments that are subtracted from the Zakah assets. But if they were not due, they would not be subtracted. Also, they are subtracted only at the fiscal year in which they become due.

 
 

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