Reference no: EM132723720

Bank Al-Riyad has provided working capital of $400,000 to Almarai based on the principle of Musyarakah Mutanaqisah on January 1, 2014. Profit and loss sharing ratio will be based on capital contribution which is 50:50 (Bank: Customer) at the beginning of the contract. The customer will repay bank's capital in equal installments throughout the contract period of four years. However, Nadec had financial difficulties during year 2 (2016) and thus only managed to pay 50% of the agreed repayment amount. Half of the amount outstanding in year 2 has been paid in year 3 and another half was paid in year 4.

Question 1: Pass the journal entries of the venture on behalf of the bank (consider yourself as the accountant of the bank) on accrual basis.

The profit and loss for the above project is as follows:

2014

Profit

SAR 180,000

2015

Loss

SAR 150,000

2016

Profit

SAR 220,000

2017

Loss

SAR 80,000