Ijara — Bank Purchases Asset to Lease to Customer
Bank purchases equipment to lease to a customer under an Ijara (Islamic leasing) contract.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Ijara Assets (Equipment Leased Out) | Asset (+) | 200,000.00 | - |
| Cash / Supplier Payment | Asset (−) | - | 200,000.00 |
💡 Accountant's Note
In an Ijara, the bank is the lessor and must own the asset. Unlike Murabaha, the bank retains asset ownership throughout the lease term. The bank bears ownership risks (e.g., major damage not caused by the lessee). The asset is depreciated by the bank, not the lessee.
Practitioner & Systems Framework
💻 ERP Architecture
Ijara assets are tracked in the bank's fixed asset module (SAP AM or Oracle FA) separate from OREO and operating assets. In Oracle FLEXCUBE Islamic, Ijara contracts link the lease schedule to the asset record. From the lessee's perspective, IFRS 16 applies — they record a right-of-use asset and lease liability.
⚠️ Audit Flags
Shariah Board must confirm the Ijara structure is compliant — the bank must bear ownership risk (takaful/insurance for major damage). Auditors check the depreciation rate applied to Ijara assets reflects their economic life. CBJ may classify Ijara receivables as loans for regulatory capital purposes.
📄 Required Documentation
Asset purchase invoice, Shariah Board approval, Ijara contract, asset insurance policy (with bank as policyholder), depreciation schedule, and CBJ regulatory treatment confirmation.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.