"Islamic Finance Researches" (IFR)

Techniques for Decision Making in Management Accounting from an Islamic Perspective

Document Type : Paper

Authors

1 Assistant Professor of Accounting, Faculty of Social Sciences, Razi University of Kermanshah

2 Master student of accounting, Faculty of Social Sciences, Razi University of Kermanshah

Abstract

Methodologies adopted by the conventional management accounting in selecting between two or more alternative courses of action, both in the long-term and short-term decision-making, conflict with the overall objective of Islamic enterprises. The paper explores the relevant literature (including the Quran and the Hadith) to ascertain the objective of an Islamic enterprise and suggests an alternative approach in making a choice among various courses of action that align with the Islamic socio-economic objective. It is also suggested that both in long-term and short-term decision-making, cost-benefit comparison (where cost includes negative externalities) rather than discounted cash flow techniques should be adopted in making a final choice among alternatives to achieve islamic objectives. The research is descriptive and has used critical analysis to evaluate the current decision-making techniques in management accounting .The paper has not considered other objectives that may be pursued by an organization besides profit maximization. It has also explored the Islamic perspective of the conventional management accounting, rarely observed by scholars in this field.

Keywords

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Volume 4, Issue 2 - Serial Number 8
May 2015
Pages 69-96
  • Receive Date: 21 January 2015
  • Revise Date: 12 September 2015
  • Accept Date: 12 September 2015