Musharaka
Musharaka is a partnership in which two or more parties contribute capital to a venture and can participate in its management under the agreed arrangement. Profit is shared according to the contract, while losses are generally allocated in proportion to capital contributions, subject to applicable terms and principles. A diminishing musharaka uses a different arrangement in which one party progressively acquires the other's interest. Distinguish the rights and risks from mudaraba, in which one party provides capital and another manages.
Worked example
Two partners contribute $60,000 and $40,000 to a venture and agree a permitted 55:45 profit share. A $20,000 profit is shared $11,000 and $9,000; a genuine $10,000 capital loss is generally allocated $6,000 and $4,000, subject to the contract and circumstances.
Common mistake
Assuming profit and loss must always be shared in identical ratios, or assuming every partner must personally manage the venture.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AFM | Supporting | September 2026–June 2027 |
| ACCA | FM | Direct | September 2026–June 2027 |