Ijara Muntahia — Asset Title Transferred to Lessee at End of Lease
Transferring ownership of the leased asset to the lessee at a nominal price at lease end.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Cash (Nominal Transfer Price) | Asset (+) | 1.00 | - |
| Accumulated Depreciation — Ijara Assets | Contra-Asset (−) | 195,000.00 | - |
| Gain/(Loss) on Ijara Asset Disposal | Revenue/Expense (±) | - | 5,000.00 |
| Ijara Assets (Cost) | Asset (−) | - | 190,001.00 |
💡 Accountant's Note
In an Ijara Muntahia Bitamleek, the ownership transfer at lease end is the intended conclusion. The asset is fully or nearly fully depreciated. The gain/loss on disposal is the difference between the book value and the nominal transfer price. This is a Shariah-compliant alternative to a hire-purchase.
Practitioner & Systems Framework
💻 ERP Architecture
The title transfer is documented via a separate Hiba (gift) agreement or a sale agreement at nominal price, distinct from the Ijara contract. In SAP AM, the asset is retired with proceeds equal to the nominal price. The Shariah Board typically requires these to be separate legal documents executed at the end of the lease.
⚠️ Audit Flags
Auditors verify the transfer of ownership is formalized via Land Registration (for property) or Transport Ministry records (for vehicles). The two contracts (Ijara and Hiba/sale) must be genuinely separate to satisfy Shariah compliance. Combined contracts are not Shariah-compliant.
📄 Required Documentation
Lease end confirmation, Hiba or nominal sale agreement, asset transfer registration confirmation (Land Department or Traffic), Shariah Board sign-off on the transfer structure, and final account reconciliation.
Automate this entry with the JEH Accounting Suite
Stop doing manual entry. Our VBA-powered ERP automatically generates your ledgers, Trial Balance, and Financial Statements.
No Subscriptions. Own your data.
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.