How is a loss covered by profits in an ongoing Mudarabah, and under what conditions does a subsequent trading agreement start anew?

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If the Mudarib incurs losses repeatedly, the loss must be covered by the profits realized, unless the owner takes possession of the capital and then returns it to the Mudarib, instructing him to trade with it again. In that case, any subsequent profit does not cover the previous loss. This is the established ruling. For capital not yet handed over, a formal accounting equivalent to physical possession must take place. This accounting involves manifesting the capital's state; it must be liquidated into cash for proper calculation, as calculating on merchandise is unreliable due to fluctuating prices. If the capital is rendered cash, the owner has the option to take possession. If the owner instructs the Mudarib to trade with the cash remaining after a partial loss settlement, this initiates a new, second Mudarabah, equivalent to the owner physically taking possession and then returning the cash. Before this formal accounting, the Mudarib is entitled to nothing until the full initial capital is restored.