Schoolgirl death devastates community

Family, friends and the community are struggling to cope with the "terrible" loss of a 12-year-old Melbourne schoolgirl killed in a terrorist attack in Iraq.

Zynab Al-Harbiya was farewelled on Wednesday in a traditional Muslim prayer service in the northern suburb of Fawkner.

The year seven girl was killed when an Islamic State bomb exploded in a busy ice cream parlour in Baghdad on Tuesday.

Family friend Yasser Alaskary said the community and family were doing what they could to cope with the "terrible" loss.

"Everyone is just in shock ... we don't understand why this happened at all," he said.

Zynab was buried on Tuesday in the Najaf cemetery, outside Baghdad.