Usury transactions and accounting practices

The purpose of the study is to find an answer to the question of how accounting should be applied to the usury transactions of participation banks, which develop tools suitable for the interest-free system. In line with this purpose, the accounting records prepared in line with the Interest-Free Finance Accounting Standard (FFMS) -28 "Usury and Other Term Sales" published by the Accounting and Auditing Standards Authority (AASA) and the current regulations were compared with the qualitative research method. Since the studies on the feasibility of the usury system used in Turkey are very new, we believe that this comparison and the new accounts suggested for the uniform account plans of the participation banks, will make important contributions to the literature. As a result, for the first time, FFMS-28 referred to the concept of inventory and the financial statements of the buyer, and explained how participation banks should recognize these changes with the proposed accounts. In the current practice, the asset that is the subject of usury is recognized as debt in the amount of its purchase cost, and profit amount and the taxes received are recorded separately, in line with the accounting standards of Turkey. According to FFMS, the asset that is the subject of usury is first recorded in the stock accounts, then written as debt using the credit account of the client and sold. The resulting difference (profit) is shown in the deferred profit accounts, which is a valuation account.