CH 4

Deposit Investment deposits Joint Investment Term Account Notice Account Saving Account Allocated Investment Portfolios Investment Deposits of credit call accounts Current Accounts

Bank deposits are divided into 1. Deposits of credit and 2. Investment deposits

Deposits of credit  Accept deposits from the deposit for the loan of the Islamic banks committed to their response without an increase or decrease  But banks here you get the authorization from the depositor to dispose of his money deposited shall not have the right to invest this money results as he does not bear any loss due to this investment

 Types of credit accounts  1. Current Accounts.  2. call accounts.

CURRENT ACCOUNT  The bank accounts are opened for people who want to save their money just to get banking services  It is possible that the depositor have been withdrawn at any time without informing the bank in earlier time.

Call Accounts  Call accounts which the accounts of the depositors to deposit funds for a limited period and they not need to drag them down  These calculations are used in short- term investments and are invested in long-term investments are handled with care and this is done after the bank's board appreciated the daily withdrawal rates

(A)Investment accounts  Investment accounts which accounts open for MOTHARABA  Where the depositor to sign a contract with the bank authorizes the bank to invest their money and profits are distributed among them according to the agreement between them and the loss will be for depositor.

 The Bank mixing money depositors with money private banks so these accounts are called co-investment accounts.  The Bank mixing money depositors with money private banks so these accounts are called co-investment accounts  The Bank is a (MOTHAREB)

 Investment accounts in Islamic banks are divided into  (A) Joint investment accounts and is divided into three sections type  1- Savings Accounts  2- Notice Accounts  3- Term accounts

Savings Accounts  Accounts are usually open to small depositors, which they can pulls up to a certain amount and a certain time and loses the amount withdrawn its right to participate in profits  In this type of accounts they are not taken to involve all the deposited amount, but the percentage is taken from all amount usually 50% and the rest is loan.

Notice Accounts Accounts are trying to combine the desire of the person in the investment and needing for withdraw,he should tell the bank when he want to withdraw before a sufficient period (usually 90 days), which makes it possible to invest a larger proportion of their money deposited in the bank

Term accounts  Accounts are linked to a specific time may not drag their money only after the expiry of the period  This is kind of the most important sources of funding for the Islamic banking operations

(B)Allocated investment accounts  Accounts are to be agreed with the owners to invest in specific projects where these accounts involved in the results of these projects and can not be drawn upon until after the liquidation of the project  This accounts for not mixed with joint investment accounts (savings and notice accounts and term)

(C) Portfolios Investment  A type of investment accounts for their They are similar to bank certificates of deposit, but it accepted on the basis of legitimate speculation  The owner of money he join in investment portfolio by shares owned by the bank and that portfolio is Mothareb

The Accounting operations for deposits in Islamic banking 1. When opening the account deposit any amount Dr Cr Cash xxx current accounts or call accounts or savings accounts or notice or term xxx 2. Upon withdrawal from the account Dr Cr current accounts or call accounts or savings accounts uh notice or term xxx cash xxx

3- when recording profits Dr Cr Joint investment (Profit) xxx savings accounts or notice or term xxx 4. When you realize losses savings accounts or notice or term xxx Joint Investment (Loss) xxx

How to calculate investment earnings  The Islamic banks accept these accounts on the basis of Motharaba, different requirements for opening the account from different bank.  The bank can invest all amount for who have term account but in savings accounts do not invest more than half of the account balance

The Islamic banks calculate the investment earnings within the following steps: 1. numbers calculated for each account separately according to the terms of the account opening. 2. Identification of all the stake holders of the investment earnings accounts.

3. determine the number per share earnings by dividing the net profit of the owners of the total net investment accounts preparation of these accounts. 4. Multiplication one share for profit into all numbers the result will be the account share from profit.

C alculating the numbers of the accounts of joint investment: a) savings: 1. The minimum balance for the purposes of participating in the investment of about 100 and considered null and void if the account balance less about it. 2. When it deposit is calculated as participation of the month following, and when the deposit withdrawals the payments from the beginning of the same month.

3. savings accounts involved at a rate of 50% of the balance. 4. deal profits treatment of regular instalment unless it has been fully withdrawn in the same month of filing. 5. If the total numbers less than 100 and the actual balance of more than 100 participants, the account will not loss remain they participated previous months in which

Example (1)  This is a statement account for Mr. Khalid in 2010 and required the calculation of the net numbers mentioned: DATEEXPLAINDrCrBalance 10/4/2010Deposit400 25/7/2010Deposit /9/2010Drawing150450

Answers Joint MonthNumber of month x amount joint = numbers 5-73 x 400 = x 600 = x 450 = 1800 Total 3600 Net of number3600 x 50% = 1800

Notice Account  1- share amounts deposited in the accounts, whether cash payments or set-off in profits from the beginning of the month following the deposit.

 2- dealing profits treatment of payments in terms of the amount and date of participation, except in case of withdrawal of profits without increasing or decreasing during the same month  3- In the case of a notice allows the customer to pull value during the seven- day maximum for the date set for the withdrawal of the notification

 4- Participation in profits by 70%  5-It is preparing for the accounts calculated under the notification just like savings accounts and the difference that this account has if withdrawals without notice, are collected all withdrawals and into to 3

 Example notice account to Mr. Sami 2007 movement Calculate the net numbers  Remember the customer did not inform the bank for his drawing DateexplainDrCrBalance 10/7/2010Deposit1000 5/9/2007Drawing /10/2010Deposit /11/2010Drawing

Answer Joint MonthsN.O x AMOUNT= Numbers 81 x 1000 = x 800 = x 1200 = 2400 Total Amount5000 – (300x3) = 4100 Net of Numbers4100 x 70/100=2870

Example DateExplainDrCrBalance 1/1/2008Balance1000 1/2//2008Profit /4/2008Drawing /7/2008Drawing200800

Term accounts  1- share amounts deposited in the accounts either in cash or others  2- Sharing begins at 500 to collect profits

 3- at maturity is the full balance of participants, even if less than 500  4- Minimum post 500  5-deductible withdrawals from the last payment of the balance or maturity date, whichever is earlier  6 - term share accounts for 90% of the total annual numbers

Example DateExplainDrCrBalance 1/2/2010Balance200 15/8/2010Deposit /9/2010Deposit /10/2010Drawing Calculate the net numbers for one person have term deposit account

Answer Joint MonthsNO. X Amount =Numbers 1-8Not Joint 91 x 2200 = x 3000 = 9000 Total of Numbers11200 Net of Numbers11200 x 90% = 10080

Examples  One of customer have term account and his statement as flowing the accrued date is 15/4/2008: DateExplainDrCrBalance 1/2/2008Balance /1/2008Profit /4/2008Drawing