Islamic perspective of management accounting decision making techniques
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Date
2013
Journal Title
Journal ISSN
Volume Title
Publisher
Emerald Group Publishing Limited
Abstract
Purpose – This paper aims to argue that the methodologies adopted by the conventional
management accounting in selecting between or among two or more alternative courses of action, both
in the long-term and the short-term decision making endeavours conflict with the overall objective
( falah) of Islamic enterprises.
Design/methodology/approach – The paper explores relevant literatures (including the Qur’an
and the Hadeeth) to ascertain the objective of an Islamic enterprise and suggest an alternative
approach, in making a choice among alternative courses of action, that aligns with the Islamic
socio-economic objective ( falah).
Findings – The paper suggests that both in long-term and short-term decision making endeavours,
cost-benefit comparison (where cost includes negative externalities) rather than discounted cashflow
techniques or contribution margin should be adopted in making a final choice among alternatives to
achieve falah.
Research limitations/implications – The paper has not considered other objectives that may be
pursued by an organisation beside profit maximization whether short-term or long-term.
P r a c t i c a l i m p l i c a t i o n s – The paper expands the frontiers of knowledge in Islamic
accounting by exposing the inadequacy of the conventional management accounting decision
making methods.
Originality/value – This paper explores the Islamic perspective of the conventional management
accounting which is rare among scholars of accounting
Description
Keywords
Falah, Cost-benefit, Islamic accountability theory, Decision making, Third party impact, Management accounting