Islamic perspective of management accounting decision making techniques

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. Practical implications – 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.