In istisna’a contract, if al-mustasni’ (the buyer or the party seeking a manufactured item) makes a payment in advance of a respective due date, al-sani’ (the seller or the manufacturer) may waive part of his profit in recognition of this premature payment. In case the seller is an Islamic bank, the amount of profit waived in recognition of early settlement should be deducted (debited) from both the istisna’a accounts receivable and the deferred profits account.
The same applies to the case when an Islamic bank taking on the seller leg of the transaction did not carry out a partial reduction of the profit upon receiving an early settlement. Instead, the bank reimburses al-mustasni’ with an equivalent amount after receiving the early payment(s).
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