How Can a Balance Sheet be Used in Calculating Zakat?

A balance sheet plays a crucial role in calculating Zakat by providing the value of stock and inventory. 

However, the stock listed on a balance sheet reflects the cost price rather than the current retail price, which is essential for calculating Zakat. A conservative gross margin percentage should be applied to determine the retail value.

Here are the steps to determine the gross margin percentage:

1. Find Net Sales & Cost of Goods Sold (COGS)
• These figures can be obtained from the income statement.
2. Calculate Gross Profit
• Subtract COGS from net sales.
• Example: 

If a business has net sales of PKR 5,000,000 and COGS of PKR 4,000,000, then:

• Gross Profit = PKR 5,000,000 - PKR 4,000,000 

= PKR 1,000,000

1. Find Gross Margin Percentage
• Divide the gross profit by net sales and multiply by 100.
• PKR 1,000,000 ÷ PKR 5,000,000 

= 20%

1. Apply the Gross Margin to the Stock Value
• If stock is recorded at PKR 10,000,000, apply the 20% margin to estimate the retail value.
• PKR 10,000,000 + (20% of PKR 10,000,000) 

= PKR 12,000,000

Why This Matters for Zakat?

• Zakat is due on the retail price, not the cost price.
• Applying a gross margin percentage provides a fair estimate of stock value.
• It is recommended to pay slightly extra to cover any miscalculations.

By following this method, one ensures a just and accurate Zakat calculation, fulfilling their obligation responsibly.

And Allah knows best!