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 of Zakat.

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

Among the most meaningful acts of giving is sponsoring an orphan at Pakistan Sweet Home — a place where your Zakat not only changes lives but also nurtures a generation with dignity, care, and endless potential.

In either case, calculating your Zakat with care ensures your obligation is fulfilled properly and the right people benefit from it. Many individuals choose to support vulnerable communities with their Zakat, especially children in need of care and protection.

One such initiative is Pakistan Sweet Home—an orphanage in Islamabad dedicated to sheltering and supporting children who have lost their families.

And Allah knows best!

Other Zakat Questions You May Have

• Should Tax Liabilities be Deducted from Zakat's Calculation?
• Are Non-current Liabilities Deductible in Zakat Calculation?
• Do Fluctuations in Wealth Impact Zakat's Obligations?
• How to Calculate Zakat on Business?
• Should Inflation Be Accounted for in Missed Zakat Payments?
• How Are Personal and Long-Term Debts Treated in Zakat?