Qard Hasan
In one sentenceAn amount lent to a person or entity to be repaid in the same amount, without any stipulated increase over the principal.
Simply put
Qard Hasan earns no return for the lender, and any increase stipulated in the contract makes it a riba-based loan. It is usually used for employees, between partners, or in charitable work.
In the books: the lender has a receivable for the loan amount and the borrower has a liability for the same amount, with no interest accrued. If the loan is long-term, IFRS 9 may require it to be measured initially at fair value; check this with your auditor.
Example
A factory lent an employee 20,000 SAR as Qard Hasan, recovered over 10 months by deducting 2,000 SAR from his salary. The factory records the amount as a receivable from the employee, the receivable falls with each deduction, and no revenue is recorded.
Don't confuse it with
Salary advanceA salary advance is deducted from the employee's own salary and is a form of Qard Hasan; Qard Hasan is broader and covers any borrower.