Q: How does one practically add up the value of all stock in business?

A: Zakat on a business can be calculated in the following three ways:

Stock count

The most precise and ideal method of Zakat calculation is performing a valualtion of stock on one's Zakat anniversary.

Personal and up to date record

If a stock count is very difficult or impractical, a business should keep a track and record of upto date transactions, cash flow and stock. This can then be used as a fairly accurate method to calculate Zakat.

Use the Balance Sheet

If keeping an accurate record is very difficult and almost impractical due to a high quantity of stock and Zakatable assets, as a last resort, you may use the last balance sheet as a reference for your net Zakatable assets. However, in such a scenario, one MUST do the following two:

1) consider and determine any obvious adjustments to his net Zakatable assets on the actual Zakat anniversary.

2) Apply the gross margin percentage to the value of stock on the balance sheet.

As a precautionary measure to ensure one’s Zakat liability is fulfilled, paying a little more than your net figure is prudent and sensible.

And Allah knows best!

Mufti Faraz Adam