Bai Salam

Defination: Bai-Salam means advance sale and purchase. Bai means sale and purchase. Salam means advance.

Bai-Salam is a contract between a Buyer and a seller under which the Seller sells in advance the certain commodities/products permissible under Islamic Shariah and the law of the land to the Buyer at an agreed price payable on execution of the said contract and the commodities/products are delived as per specification, size, quality, quantity at a future time in a particular place.
In other words, Bai-Salam is a sale whereby the seller undertakes to supply some specific commodities/products to the buyer at a future time in exchange of an advanced price fully paid on the spot.
Here the price is paid in cash, but the delivery of the goods is deferred.

Accounting for Bai Salam:

 While purchasing 

1. Dr. Bai Salam
Cr. A/C , PO,

At the time of closing (normal)

2. Dr. Clients A/c
Cr. Bai Salam
Cr. Income Bai Salam

Fine Charge for delayed period as per contract

3. Dr. Bai Salam
Cr. Income Bai Salam

Closing Bai Salam (along with fine as per contract)

4. Dr. CA
Cr. Bai Salam
Cr. Income (with fine amount)

Classified Bai Salam

5. Dr. Income ( unclassified overdue period)
Dr. Bai Salam (Classified period)
Cr. Fine Suspense Account(Bai Salam)

After BL Investment Income /Fine must be stopped