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Equation for Calculating the Zakat Base Zakat can be calculated using one of two methods: The direct method (Net Zakatable Assets Method). The indirect method (Sources of Funds Method). Each method differs from the other in the procedures and the statement of financial position items used for Zakat calculation purposes, while both methods lead to the same result (Zakat base) if correctly applied and using the same standards and inputs. Below is a summary of both methods: The Direct Method (Net Zakatable Assets Method) This method is based on two main steps: Adding all the Zakatable assets of the establishment, including receivables owed to the Zakat payer. Deducting the balance of liabilities that funded the Zakatable assets. The result of this equation is the Zakat payer’s base. Zakat Base = Zakatable Assets - Liabilities that Funded Them. Indirect Method (Sources of Funds Method): This method is based on two main procedures: Addition: External Sources of Funds used in a deductible element of the base, including long-term liabilities and their equivalents, not exceeding the deducted assets. All Internal Sources of Funds of the establishment (owners' Equity and its equivalents), including adjustments to the net result of the activity. Deduction: The value of non-zakatable assets of the establishment that must be deducted in accordance with the regulation conditions. The value of assets on which zakat has already been paid in other establishments, such as investments in shares of Saudi companies. Zakat Base = Internal sources of funds (Equity and its equivalents), including adjustments to the net result of the activity + External sources of funds not exceeding the deducted assets - non-zakatable assets - Assets on which zakat has already been paid, taking into account the limits of the base. The Zakat base for Zakat payer is calculated according to the Regulation using the indirect method. This method involves the formation of the base by adding the items of addition represented in the sources of Zakatable Funds (Non-current liabilities and their equivalents within the deductions, and Equity and its equivalents) and then deducting the deduction items represented in the deductible assets, in accordance with the procedures and concepts outlined in the Regulation. The equation for forming the base is summarized in Article 21 of the Regulation, which states that the Zakat base is represented by adding the addition items while deducting the deduction items. The addition and deduction items can be presented and summarized as follows: As per Article 23 of the Regulation, added items include: 1. Equity and its equivalents. 2. Liabilities stipulated in Article 29, within the limits of the deducted assets. The article included the addition of non-current liabilities, which encompass the following: The debts classified as non-current according to the end-of-period balance, whether from prior years or added during the year; such as advance payments from the Zakat payer's customers, issued bonds and instruments.