Skip to content

Latest commit

 

History

History
99 lines (68 loc) · 6.31 KB

exchange_rates.md

File metadata and controls

99 lines (68 loc) · 6.31 KB
Raw

How Exchange Rates Work in a Zakat Calculation System?

The Goal:

Zakat is an Islamic practice of giving a portion of one's wealth to charity. When calculating Zakat, you sometimes need to convert between different currencies (e.g., from US dollars to Saudi riyals). This code is part of a larger program that helps manage these currency conversions.

The algorithm helps keep track of how the value of a currency (like dollars, euros, assets etc.) changes compared to your local currency over time. This is important for Zakat because it ensures accurate calculations of your wealth in your local currency in current time.

Think of It Like a Timeline:

  • Time A, B, C: These are specific moments when you recorded the exchange rate. For example:

    • Time A: 1 US dollar = 3.75 Saudi Riyals
    • Time B: 1 US dollar = 3.78 Saudi Riyals
    • Time C: 1 US dollar = 3.80 Saudi Riyals

  • The Algorithm's Logic:

    1. Latest Rate (C): If you ask for the exchange rate without specifying a time, the algorithm gives you the most recent rate it has (Time C in our example).
    2. Rate Between Times: If you ask for the exchange rate at a specific time:
      • Between Time B and C: You'll get the rate from Time B.
      • Between Time A and B: You'll get the rate from Time A.
    3. Before Time A: If you ask for the rate before any records exist, the algorithm assumes the exchange rate is 1:1 with your local currency (1 US dollar = 1 Saudi Riyal). This is because it has no information to go on.

Why This Matters for Zakat:

  • Fairness: Zakat is calculated on your wealth at a specific time. By using the correct exchange rate for that time, you ensure a fair and accurate assessment of your assets. It ensures fairness by accounting for fluctuations in exchange rates, especially if you acquired the asset at a time when the exchange rate was different.
  • Accuracy: Currency values fluctuate. If you used today's exchange rate for assets you held years ago, it would be inaccurate. This algorithm helps avoid that problem. Using the correct exchange rate ensures that the Zakat calculation accurately reflects the value of your assets in your local currency, leading to a fair assessment of your Zakat obligation.
  • Transparency: The algorithm provides transparency by clearly indicating the exchange rate used in the calculation, allowing you to verify the accuracy of the Zakat assessment.

Zakat is often calculated based on the value of assets in a specific currency (like gold or silver). But people may hold their wealth in different currencies. This code ensures that the Zakat calculation uses the correct exchange rates to get an accurate assessment of someone's wealth.

In cases where the Zakat algorithm is used for assets like cars, houses, or tradable products, the exchange rate plays a crucial role in determining their value in your local currency.

Here's how it works:

  1. Asset Valuation:
  • The first step is to determine the value of your asset in its original currency. For example:
    • A car might be valued at $20,000 USD.
    • A house might be valued at €300,000 EUR.
    • Products on a shelf might have a total value of ¥500,000 JPY.
  1. Exchange Rate Retrieval:
  • The algorithm then fetches the appropriate exchange rate for the date you're calculating Zakat. This is where the timeline concept we discussed earlier comes in. It ensures you're using the correct exchange rate for the time when you owned or acquired the asset.
  1. Conversion to Local Currency:
  • The algorithm multiplies the asset's value in its original currency by the retrieved exchange rate to calculate its value in your local currency. For instance:
    • If the exchange rate on the Zakat calculation date is 1 USD = 3.75 SAR, the car would be valued at 20,000 USD * 3.75 SAR/USD = 75,000 SAR.
  1. Zakat Calculation:
  • Once you have the value of the asset in your local currency, you can apply the standard Zakat calculation rules based on the type of asset.
    • For cars and houses used for personal use, generally, no Zakat is due.
    • For tradable assets like products on a shelf, Zakat is typically calculated as a percentage (often 2.5%) of their value.
  1. Exchange Rates Application:
  • The algorithm calculates the exchange rate automatically in these situations:
    • While transferring between accounts.
    • While checking Zakat obligations for boxes in every account.
    • While doing check payment parts for collective values to be deducted from due accounts on other accounts.
    • While Zakat Calculation itself is applied on all boxes within account.

The Code in Simple Terms:

The code essentially does this:

  1. Stores Rates: It records the exchange rate whenever you provide it.
  2. Looks Up Rates: When you need a rate, it finds the correct one based on the time you specify.
  3. Handles Missing Data: If it doesn't have a rate for a specific time, it uses a sensible default.

The Code's Purpose:

This specific part of the code does two main things:

  1. Record Exchange Rates: It lets you store information about how much one currency is worth compared to another at a particular point in time.
  2. Retrieve Exchange Rates: It lets you look up the exchange rate for a specific currency at a specific time.

How it Works:

  1. Parameters (Inputs):

    • account: The name or code of the account you're dealing with (e.g., "USD" for US dollars).
    • created: The date and time the exchange rate was valid (if you're recording a new rate).
    • rate: The actual exchange rate (e.g., 1 USD = 3.75 SAR).
    • description: Any extra information about the exchange rate.

  2. Actions:

    • If you provide a rate:
      • The code checks if it's a valid rate (greater than zero).
      • It saves the rate, the time, and any description to the account's history.
    • If you don't provide a rate:
      • The code finds the most recent exchange rate that is valid for the date you're interested in and returns it.
      • If there's no valid rate, it returns a default value (usually meaning 1:1 exchange).

Key Points:

  • The code uses a _vault to store exchange rates, acting like a secure record-keeping system.
  • It has a _step function, likely to track changes or updates in the system.
  • The debug option is for testing and troubleshooting the code.