ACCA FM · Chapter 10 · Question 7 of 11
What is the key difference between Mudaraba and Musharaka contracts?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) In Mudaraba one party provides all the capital and the other provides expertise, whereas in Musharaka both parties contribute capital
Explanation
Both are profit-sharing arrangements. In Mudaraba, the capital provider supplies all the finance and the entrepreneur manages the business; profits are shared in agreed proportions and financial losses are borne by the capital provider. In Musharaka, both partners contribute capital (similar to a joint venture) and share profits and losses.
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