A COMPARISON OF CONVENTIONAL LEASE AND ISLAMIC LEASE (IJARAH)

Abstract

Leasing arrangement which is widely practiced in the business operation to acquire the physical asset is also permitted in Islam in which the evidence is shown in the Quran and Hadith. It must be noted however that the Islamic lease and conventional lease contract as practices today are different in their underlying principles. In view of this, this paper attempts to compare between the conventional lease and Islamic lease or Ijarah by referring to the guideline prescribes under the conventional accounting standard and Islamic accounting standard. A discussion in this paper might give some insights to the users of the financial statements or the public in understanding the differences between conventional lease and Islamic lease (ljarah).