The National School Lunch Program Essay Example for Free

The National School Lunch Program Essay The provision of school meals in America began, as it did in many other lands in a rather sporadic way. According to the web site about the history of the School Lunch Program, in New York The Children’s Aid Society started a program in 1853, but it wasn’t until Robert Hunter’s book ‘Poverty’ was published in 1904 that other areas really took up the challenge. Hunter felt that it was no good having a law that compelled children to go to school if they were so hungry that they couldn’t concentrate or gain much benefit. In Philadelphia the Starr Association had begun serving penny dinners in 1894 and in 1908 programs were begun in Boston by the Women’s Educational and Industrial Union. The children ate their dinners at their desks, there being at that time no school food halls. By the end of the 1910 school year 2,000 pupils were being served. Ellen H. Richards wrote in the Journal of Home Economics for December 1910, The teachers are unanimous in the belief that the luncheons are   helping the children both physically and mentally. They are more   attentive and interested in the lessons during the last hour of the morning and the result in their recitations gives the proof. The National School Lunch Program started in 1946 under the National School Lunch Act signed by the then president Harry S. Truman, though school meals had been provided for many years before that through foods and subsidies from the United States Department of Agriculture. The reasoning behind the act was not just nutrition, but national security. This was because when America entered World War II it found that many recruits were of poor physical condition, especially those who had grown up in poor families during the depression years of the 30’s. As soon as that war finished America began to think about the next wave of conscription as it expected to have to fight communism in the near future. It was mainly under the auspices of General George C. Marshall, a member of the cabinet. According to the statute book its aims were as follows:- It is hereby declared to Congress, as a measure of national security, to safeguard the health and well-being of the Nation’s children and to encourage domestic consumption of nutritious agricultural commodities and other food, by assisting the States, through grants-in-aid and other means, in providing an adequate supply of foods and other facilities for the establishment, maintenance, operation, and expansion of nonprofit school lunch programs. The federally assisted program now operates in 100,000 both public and private schools. 7.1 million children benefited in the first year and the program now provides lunches to 29 million school children each day. The cost in 1947 was $70 million, but by 2005 it was $7.9 billion – a huge investment in the future health of the nation. The aim is that meals are free or at a low cost and that they are nutritionally balanced. In 1998 the program was expanded to include young people up to the age of 18 and also to include snacks served to children at after school educational and enrichment programs. At state level it is usually under the state education authorities who operate through agreements with the school food authorities. Usually it is high schools, both public and non-profit making private ones, who participate as well as private residential child care facilities who take part in the program. I t works by giving both cash and commodities to the institutions involved, the latter, known as ‘entitlement foods’ coming from the U.S. Department of Agriculture at a value of 16.75 cents for each meal served. They may also be given extra food from surplus stocks. In return the schools must meet federal standards in the food that they serve and offer these freely or at a reduced price to eligible children. Other support is available through the USDA’s Team Nutrition who provide nutritional and technical help and also provide nutritional education for pupils. The schools may decide for themselves which foods are served, but must comply with Federal nutritional guidelines which state that no more than 30% of calories should come from fat and less than 10% from saturated fat. They should also provide at least one third of the recommended needs for protein, vitamins, iron, calcium and calories. The meals are available to all children at schools which take part in the program. Those with incomes of less than $26,000 for a family of 4 i.e.130% of the poverty level get their meals free. Those with incomes between this and $37,000 i.e.185 % of the poverty level, get their meals at the subsidised price of no more than 40 cents. These figures are valid until June 30th, 2007. Other children pay more, but the school meal services must be run on a non-profit basis. When it comes to after school snacks if more than half the children in an area are eligible for free or reduced price school meals, then snacks may be free too. Reimbursements to the schools vary a little. Those in Alaska and Hawaii receive more, as do schools with a very high percentage of poorer pupils. There are links with local producers who can provide fresh food such as salad vegetables and fruit. The USDA works with the Department of Defence to provide food purchased through the Department of Defence. The supplies are monitored for fat content and their safety. Programs such as this provide children with the possibility of at least one nutritionally balanced meal a day. This may be prepared in a central kitchen, either r private or belonging to the educational authorities and distributed to schools. Other schools have their own kitchens. What the program can’t do is ensure that the meals are eaten rather than some fast food bought in or bough tin school from vending machines.. they also cannot ensure that the rest of a child’s nutrition is balanced or indeed that he gets enough other food. They educate children about nutrition, but children are not usually the food buyers or cooks at home. It may be, especially in the case of minorities and new arrivals, that the children find school meals unpalatable simply because they are different to what they get at home. Vending machines are in schools which provide other foods at extra cost which are not necessarily nutritionally so good such as chips and soda. There will always be children who prefer these. It would be a dictator who insisted that every one ate the same food, but do these poorer foods have to be so freely available? However many schools raise much needed funds in this way, though child obesity it must be said is a growing concern. For many children their school lunch is the main meal of the day. It is easy to give in to the demands for fast foods, even when those doing so know that they are ultimately harmful. Schools can either use a Nutrient Standard or the older food Group system when choosing the foods they provide. The Nutrient Standard is more accurate in providing a balanced diet, but most schools still prefer the older system. Choice USA recommends that parents regularly review the food that their children are receiving and discuss their choices with them. The child Nutrition Act of 1966 followed on from the National School Lunch Act. Under this act free or low breakfasts could also be provided. This had been initiated by the Black Panther Party earlier. President Johnson said when he gave his signature to the act ‘Good nutrition is essential to good learning.’ There had also been a Special Milk Program which began in 1954. The United States tries to care for all its citizens and so there is also a Child and Adult Care Food Program for both children and elderly and mentally or physically impaired adults in non-residential centers, and the Food Stamp program which began in 1953, so there has been a move away from just ensuring that those called to military service are fit to serve. All this from such small beginnings in one New York school. Electronic Sources Child Nutrition Act found 30th May 2007 http://en.wikipedia.org/wiki/Child_Nutrition_Act Choice USA found 30th May 2007 at http://www.choiceusa.net/Parents_NSLP.html The history of school meal programs found 30th May 2007 at http://www.fns.usda.gov/cnd/Lunch/AboutLunch/ProgramHistory_2.htm National School Lunch Program found 30th May 2007 at http://www.fns.usda.gov/cnd/Lunch/AboutLunch/NSLPFactSheet.pdf School Nutrition found 30th May 2007 at http://www.schoolnutrition.org/uploadedFiles/ASFSA/childnutrition/govtaffairs/nsla.pdf

Analysis of Leadership Agility Theory

Analysis of Leadership Agility Theory Leadership is in a constant flux, driven by the dynamics of an ever-changing global landscape. Competition has never been fiercer, times have never been more unpredictable, and leadership has never been more significant for organizations to succeed. Bill Joiner and Robert Stephens (2006) introduce the concept of leadership agility which they defined as the ability to take wise and effective action amidst complex, rapidly-changing conditions (p. 6). The best thing about the book is that upon reading the introductory pages, you already know that it is a timely book on leadership. Joiner and Stephens make their case early on that effective leadership in the globalized world is contextualized that with the cross-cultural considerations, leaders are now faced with the challenge to adapt more ably to changing conditions and goals. When it comes to books on leadership, I was looking for concrete examples on what the authors are actually trying to point out in order to illustrate the theori es in a real-world setting. This book did not disappoint me on this aspect. There were numerous examples of individuals at various stages in their leadership careers, how they handled crisis situations and decision-making, including the strengths and weaknesses of their judgments. The last chapter of the book also encourages the reader to assess his or her level of organizational agility and to determine which core competencies of agility he or she needs to develop to lead more effectively. The book is well-written, not very technical in language, very organized, and rife with illustrations on the points they wanted to make, particularly on how the various levels of agility and core competencies differ from one another. From the title itself, I expected structure as I knew the authors would try to guide me through what they call the five levels of mastery in leadership. The authors succeeded in meeting all the challenges in coming up with a book on leadership that in the end, gives the reader not only the basic concepts, but teaches him on how to measure his or her agility level provide guidance on what to do next. In this book review, I intend to indicate the strengths as well as the points for improvement that I found while reading the book. I will also synthesize the concepts presented by the authors to relevant leadership concepts we have learned from the course from Northouse (2008), Clawton (2008) and Kouzes and Posner (2007). Highlights of the Book Part One of the book introduced the core competencies in leadership agility which is the main topic of this work. To do so, the authors did three things. First of all, they provided the rationale for leadership agility in the context of the interdependent world that has been borne out of globalization. They emphasized the complexity that leaders in organizations now face. The acceleration of ideas and new technologies has increased competition to a level never anticipated in the past. With the speed of these technological changes, opportunities and threats are also encountered at roughly the same level. This necessitates leaders to develop the ability to become agile, a behavior demonstrated when leaders are able to leverage resources and relationships in order to effectively respond to changes that affect the organization. Agility, said the authors, is developmental it passes through different stages and displays specific behaviors as leaders go from the most basic stage to the hig hest. The five steps in leadership agility include (from the lowest to the highest level): expert, achiever, catalyst, co-creator and synergist (Joiner Stephens, 2006). Second, in order to provide a brief look at how agility is demonstrated differently in five ways, the authors narrated a fictional character, Ed, a manager, who, upon encountering a situation responds to it in five very distinct ways. The manner in which Ed responded to the situation given illustrated a level in the leadership agility hierarchy. Third, the authors presented core competencies which are significant in leadership agility. By competencies, they meant the abilities and the skills needed by leaders to become agile. All in all, there are four competencies, which include context-setting agility, stakeholder agility, creative agility, and self-leadership agility. Under each core competency are two capacities involved. Within the context-setting agility, leaders have sense of purpose and situational awareness . Under creative agility, leaders possess reflective judgment and connective awareness. Under stakeholder agility, leaders possess power style and stakeholder understanding. Under self-leadership agility, leaders possess developmental motivation and self-awareness. Part Two of the book expounds on the five stages of leadership agility, devoting one chapter for each level. This section of the book explained in detail the areas, distinctions, and differences at each level of agility and illustrated each by presenting at least three case studies. The authors showed the leadership style, organizational initiatives, team leadership, and handling pivotal conversation associated with each agility level. The specific stages in leadership agility intertwine with some of the leadership concepts and styles that have been discussed in the course. I will discuss the concepts in relation to the five leadership agility levels. Expert. At the Expert Level, which is the lowest in the agility hierarchy, the leader proceeds with a tactical and problem-solving style of leadership. At this stage, the leader believes he holds the expertise and position to know what is best for the organization. This is similar to what has been learned from the course objectives. The style of leadership being manifested at this level is transactional management is key. This is what Burns (as cited in Northouse, 2008) tried to reiterate in distinguishing managers and leaders in that managers are people who do things right and leaders are people who do the right thing (p. 213). The thrust in the Expert level of agility is results, not the fulfillment of organizational goals or empowerment of followers. The leader stays on top of the situation. While this leadership style gets things done, it is a mild variation of the autocratic leadership style because the leader is the central decision-making body and the leader assumes that he o r she alone knows what is best for the company. Achiever. The Achiever strives for outcome and leads knowing that ones expertise and positional authority alone does not lead to effective leadership but also on ones capacity to motivate others. In this stage, the leader moves up from being purely transactional to recognizing the need to be transformational as well. Northouse (2008) explained the difference between transactional and transformational leadership by saying that the latter motivated by considering and appealing to the interest of the followers. The ability to motivate others is the leadership aspect in Kouzes and Posners (2007) so-called journey. According to them, leadership requires the capacity to convince people to go on board while management guarantees that they reach the destination. To Joiner and Stephens (2006) then, the Achiever level of agility requires one to be both leader and manager. The Achiever initiates change by looking at the market environment and seeking input from stakeholders. Since the Achiever prioritizes outcome, there is an emphasis on using communication to assert the leaders views as well as accommodate views from others so long as it furthers organizational goals. One of the biggest concerns for leadership is handling the change process through more effective ways of communicating (Northouse, 2008; Clawson, 2008). Clawson (2008) considered communication important in any organization and opined that meetings should be a forum of empowerment. Clawson (2008) believed that meetings are an avenue where leaders show that while being the head of the organization, he or she is not supposed to dominate the group but instead empower them to speak out about current concerns and to foster dialogue in the direction of finding working solutions. Catalyst. The Catalysts leadership style is visionary and innovative and is able to articulate goals and at the same time inspire people into achieving those goals. In a sense, the Catalyst is transformational and realigns the culture and values of an organization to that of empowerment, teamwork, and participation. The Catalyst pushes for change and does so progressively. This is because he or she realizes that organizational change and member empowerment are vital elements of building and maintaining an industrious and dynamic organization. Kouzes and Posner (2007) believed that transformational leaders engaged stakeholders proactively and values their feedback as important considerations in decision-making. Even in the midst of opposition, the Catalyst welcomes dialogue and considers team-building to be an integral part of leadership development. This is very similar to what Northouse (2008) referred to as intellectual stimulation present in transformational forms of leadership. T his is a characteristic where leaders foster a climate of open-mindedness and creativity, challenging members to question the status quo, and to challenge their beliefs and values, as well as those of the leader (Northouse, 2008, p. 177). Northouse (2008) also highlighted in Chapter 6 of Introduction to Leadership that vision is crucial in leadership and that possessing it is as important as articulating it effectively, as in the case of Martin Luther King, Jr.s famous I Have a Dream speech and the inaugural address of John F. Kennedy. In the same vein as Joiner and Stephens (2006) emphasis on the Catalysts appreciation for feedback, Northouse (2008) also considered the development of group behaviors as important and that leaders must ensure that members are trained to provide constructive feedback that will help improve the dynamics of the team toward organizational effectiveness. On the other hand, Kouzes and Posner (2007) said that that leaders must search for opportunities to in novate, grow, and improve but reiterated that leaders should not be the only sources of innovation (p. 371). Cocreator. Joiner and Stephens (2006) identify the Cocreator as someone with an orientation toward collaboration and shared objectives. The Cocreator views leadership more importantly as a form of service toward the common good, similar to Kouzes and Posners (2007) emphasis on leadership as a means of achieving justice. Joiner and Stephens (2006) places upon the Cocreator the capacity to leads toward organization change by creating deep relationships with stakeholders fueled by mutual interests and devotion to uphold the welfare of the general population. The Cocreator may be more inclined to advocate for corporate social responsibility as a crucial component in organizational leadership. Team leadership to him is about collaborative practices and instilling in members that the welfare of the organization is a collective responsibility (Northouse, 2008). At this stage, leaders are aware that in order to accomplish goals and in handling change more effectively, they need followers, a nd vice versa. It is also at this stage where leaders are more keen on adopting ethical practices in leadership, because the leader becomes more aware that the actions, values, character, and goals of the organization are important (Northouse, 2008). Synergist. The Synergist is the highest type of leadership agility and in the authors estimation, present only in 1% of managers today. The leadership orientation is holistic leading becoming a purposeful activity which benefits the organization while at the same time becoming a medium for personal transformation. A sense of purpose is a recurrent theme in leadership literature and is an acknowledged element in the change process. Effective leadership, according to Clawson (2008) is pursuing purpose by exerting ones influence in improving the conditions and making things better for the organization and the society in general. The Synergist is able to maintain a keen yet objective awareness of incompatible stakeholder interests but is able to transform these differences in opinion into a win-win situation to the benefit of all concerned. Team leadership in a Synergist is fluid and dynamic and is able to form group dynamics in a way that provides optimum results. When engaging in pivo tal conversations, the Synergist maintains a present-centered awareness that is able to unify the organization despite chaotic situations (p. 11). According to the authors, this is the type of leadership agility that all managers should aspire for in the long-term. ÂÂ   While the five levels of leadership agility are hierarchically presented, meaning that the topmost Synergist level is the most effective form, Joiners and Stephens (2006) are quick to point out that this does not mean that the Synergist type is always the applicable one. In this vein, leadership agility becomes situational (Northouse, 2008). At this current business environment and considering the present forms of leadership that are found in most organizations, the challenge is to get past the so-called heroic leadership forms characterized by Achievers and Experts at the lower and middle level management (Joiner Stephens, 2006, p. 35). Heroic leadership is purely transactional, characterized by self-centeredness and the belief that the leader along is responsible for charting the organizations objectives, coordinating the activities of the members, and in managing how workers perform their respective jobs. Agile leadership on the other hand is transactional as well as transformati onal because it is dynamic and adaptive to the requirements of rapidly changing global business environment requires (Kouzes and Posner, 2007). The authors recommend the post-heroic leadership forms that emerge from the Catalyst stage onwards. What is desirable about post-heroic leaders is that while leaders hold accountability and accept ultimate responsibility, they allow members to participate and the organization shares commitment and burden in realizing organizational objectives. In this manner, even members of the group are empowered without necessarily holding a position with power. Conclusion This work from Joiner and Stephens (2006) is a response to the ever-growing challenges of leadership that has swept the global age. Compared to the more normative concepts of effective leadership that could be read from Northouse (2008) and Kouzes and Posner (2007), Joiner and Stephens focused on the ability not only to achieve organizational outcomes but to adaptability as well to respond to the changing conditions in society to achieve success for the business or organization. Comparatively, Joiner and Stephens presented a more contemporary strategy for todays leaders and highlighted examples that are grounded to twenty-first century realities. They used recurrent themes in leadership in presenting their case for leadership agility such as the distinguishing the difference between managers and leaders. The first two forms (Expert and Achiever) resemble the traits of a manager who controls, arranges, and does things right (Northouse, 2008, p. 135). Joiner and Stephens (2006) recogni ze that managerial skills are important in achieving outcomes but must be elevated to include transformational leadership skills in order to apart more effectively to global challenges. For instance, in education reform, there is a need to apply more creative strategies in response to organizational change. This may include proposing for policies that require 1) inclusion and diversity, 2) trends in curriculum and instruction, and 3) use of technology (OConnell, 2010). As agility progresses to the Catalyst, Cocreator, and Synergist level, the managers transitions to a leader who not only gets results but unleashes creative potential among followers, guides them with a sense of purpose and vision and empowers them toward achieving not only the outcomes of the organization but toward the good. Joiner and Stephens (2006) also dealt with the importance of communication in handling the change process. They reinforced Clawson (2008) in saying that meetings should be empowering to follower s. Furthermore, communication also requires that the vision and mission of the organization are articulated well and understood by all levels within the organization (Clawson, 2008; Kouzes Posner, 2007). Joiner and Stephens (2006) incorporates some of the traditional leadership concepts such as transformational leadership, motivation, influence, creativity, innovation into the hierarchical leadership agility model but is unique in characterizing the stages in agility into three areas: organizational change, team leadership, and handling pivotal conversations. Dealing with and initiating change is one of the central tenets of this book. Clawson (2008) opined that organizations need to respond to changes in the external environment more proactively. Leaders need to develop a comprehensive understanding of competition, market, consumer issues, and all possible underlying factors in order to adapt more effectively to changes. Competitiveness in this global age relies not on what has been traditionally done, but on versatility and change (Kouzes Posner, 2007; Clawson, 2008) or agility according to Joiner and Stephens (2006). As a response to accelerated technological developments and in creasingly borderless world, firms and organizations must step up to the challenge of constantly innovating and addressing threats that come and embracing opportunities encountered. One weakness of this book is that it is largely silent on ethics as a consideration on leadership agility. Kouzes and Posner (2007) capitalized on ethical leadership as an urgency for organizations. Northouse (2008) considered it important for leaders to continually self evaluate in terms of how they are performing in better, fairer, and more humane ways (Northouse, 2008). Oftentimes, change in the globalized world is synonymous with maintaining competitive edge over others usually at a cost. With the increasing attention on global climate change, environmental issues, terrorism, protectionism, and even resistance to globalization in the twenty-first century, leaders must be highly adaptive to these global issues as well and weigh how these global conditions come into the equation.

The Sabotaged Friendship of Authors Ernest Hemingway and Sherwood Ander

The Sabotaged Friendship of Authors Ernest Hemingway and Sherwood Anderson Ernest Hemingway, an intrinsically gifted author in his own right, owes much of his early success to the mentor he befriended and eventually estranged, Sherwood Anderson. Hemingway’s renowned knack for sabotaging personal relationships throughout his life started early with Anderson. The two writers met in a suburb of Chicago named Oak Park while Hemingway worked as an editor for the Cooperative Commonwealth in 1919. Anderson would go on to help Ernest publish his first successful work (inspired by Sherwood’s own writing), In Our Time, but the friendship would come to an abrupt end in 1926 courtesy of Hemingway’s satirical jab at his former mentor in The Torrents of Spring. Sherwood Anderson was a relatively well-established author when he met Ernest Hemingway. Before they encountered one another, Hemingway had already read Anderson’s Winesburg, Ohio. Ernest â€Å"was a great admirer of [Anderson’s] work, particularly those tales which had sporting scenes for their backgrounds† (Schevill 153). Whenever the two were around each other, Hemingway was always â€Å"quiet and attentive† (Fenton 104), though Ernest’s friend, Kate Smith recalled: â€Å"It probably means a storm’s brewing† (Fenton 104). Hemingway would internalize all that he learned from his time spent with Anderson in Chicago. The two shared a similar interest in â€Å"sex as a basic human drive,...the examination of youth and its distresses,†¦[and] the importance of emotion and feeling† (Fenton 148). Anderson himself denied ever influencing Hemingway’s work â€Å"as a whole† (Fenton 105). Anderson me rely recognized the talent that Hemingway possessed. Motivated by his appreciation... ...rite to him that he meant the book as a joke, though Sherwood failed to recognize the humor in it. Anderson interpreted the book as a personal insult. The relationship between the two authors was never the same. Later in 1926, the two met in Paris over drinks, but Anderson noted that Hemingway had become â€Å"too self-centered, too concerned with his own career to the exclusion of personal relationships† (Schevill 238). The rift created by the Torrents of Spring would never be mended. Over the years, Anderson remained an avid fan of Hemingway’s work, but their friendship dwindled out of existence. Sherwood Anderson inspired multitudes of young writers: Faulkner, Joyce, Hemingway, Stein, to name a few, with his simple narrative tone and colloquial settings. Anderson served as the perfect mentor in cultivating the talented minds of some of America’s finest writers.

Free Essays: Symbolism in Hawthornes Young Goodman Brown :: Young Goodman Brown YGB

Nathaniel Hawthorne's work is typically fraught with symbolism, much of it deriving from his puritan ancestry. Hawthorne was obsessed with the themes of sin and guilt. John Roth notes that "A number of recurring thematic patterns and character types appear in Hawthorne's novels and tales" (Roth 76). Because he is speaking of what we would later come to call the unconscious, Hawthorne extensively employed the use of symbolism, which bypasses the conscious to tap into its more dream- like process below (Roth 76). In his short story "Young Goodman Brown," the main character Goodman Brown goes off into the woods and undergoes what will be a life changing experience. "Young Goodman Brown," was written in the nineteenth century but is undoubtedly set in the seventeenth century, and for the early Americans in this time period the forest was a symbol of the test of strength, courage, and endurance. It took a lot of courage to survive there, and the young person entering the forest would not emerge the same. But the story is more symbolic than realistic, and the dangers that Goodman Brown encounters in the forest are not Indians or bears; they are dangers of the spirit. It is no accident that such an experience should have taken place in the forest, because there is a long and extremely profound tradition in American literature where experiences of this nature haven taken place in forest settings. Psychologist Bruno Betelheim observes that "Since ancient times the near impenetrable forest in which w e get lost has symbolized the dark, hidden near-impenetrable world of our unconscious" (Betelheim, 94). However, this does not appear in "Young Goodman Brown." Instead of bravely battling down the dangers of the forest and emerging a more mature person, Goodman Brown emerges a ruined man. Â  It should not go unrecognized that Goodman Brown's wife, a light-hearted, genuine woman, has the name Faith. Faith is not by any means an unusual name for a woman, especially in puritan times, but it becomes significant in the story because she is presented to us first as a very young bride with pink ribbons in her hair, almost like a child. Her pink ribbons symbolize her youth, and her name symbolizes her husband's childlike spirituality at the beginning of the story. Christianity historically has been a religion of obedience and devotion much more than one of logic, as much as the framers of the age of reason would try to argue otherwise.

Social Affects on Neurobehavior Essay -- Biology Essays Research Paper

Social Affects on Neurobehavior "The brain does not exist in isolation but rather is a fundamental, interacting component of a developing, aging individual who is a single actor in the larger theater of life. This theater is undeniably social. . ." (1) For the past few weeks our class discussions have largely hinged on brain and neuron function and how this relates to behavior. Some students in the class have expressed a difficulty with the concept that brain equals behavior because they feel like this limits their individuality and choice if they are only a combination of inputs and outputs. As a student of the social sciences I question this thinking because behavior is not just limited by brain function but also by social constraints. People's actions are limited by values, norms and mores found in their respective environment. In my web research, and with help from Dr. Grobstein, I found a few sites dedicated to what is called 'Social Neuroscience' and some studies that have been done to show that in animals and humans social influences can have a direct effect on biological function from the release of certain chemicals to actual changes in receptors. The first site is run by Ohio State and tells the history of social neuroscience and looks at social factors and the immune system. The second is run by a professor in the United Kingdom looking at diet and criminality and the last is from Georgia State and looks at social status and defense mechanisms in crayfish. William James an American psychologist of the 19th century was one of the first people to state that there is a connection between neurophysiological processes and psychological phenomena (1). In 1992 John Cacioppo and Gary Bernstein determined that t... ... responsiveness even when the crayfish becomes the subordinate. So a change in the social status of the crayfish causes changes in the receptors for seratonin in the nervous system of the crayfish. This is a striking example of the social environment causing direct changes in the nervous system. As more and more research in this area develops, I am sure we will see an even stronger connection between social environment and the development and functioning of the nervous system and maybe gain more insight into why people behave the way they do. WWW Sources 1)Ohio State Social Neuroscience Laboratory http://www.acs.ohio-state.edu/units/psych/s-psych/socnelab.htm 2)Crime and Nourishment http://mhnet.org/perspectives/articles/art03964.htm 3)Research: The Neural Bases of Behavior, (very interesting picture of the LG neuron) http://www2.gsu.edu/~biodhe/

Accounting Concepts, Conventions and Solutions

Table of Contents QUESTION ONE: Accounting Concepts and Conventions1 a)Accounting Concepts1 i)The going concern concept. 1 ii)The accruals concept (or matching concept)1 iii)The entity concept:3 iv)The money measurement concept:3 v)The historical cost concept:4 vi)The realization concept:4 vii)Duality concept:4 b)Accounting conventions5 QUESTION TWO: Clashing accounting concepts and conventions that might bring about inconsistency in the accounting process9 1. Clash between the accruals/matching concept and the prudence convention9 2. Clash between the historical cost concept and Prudence convention9QUESTION THREE: Solutions to the clashing accounting concepts and conventions11 REFERENCES13 QUESTION ONE: Accounting Concepts and Conventions a) Accounting Concepts Accounting Concepts are broad basic assumptions that underlie the periodic financial accounts of business enterprises. They outline the rules of accounting that should be followed in preparation of all financial statements. T hese concepts are outlined in the International Accounting Standard 1(IAS 1)-presentation of financial statements. The word ‘concept’ in this context means an idea or thought that has a universal application.This includes; i) The going concern concept: implies that the business will continue in operational existence for the foreseeable future, and that there is no intention to put the company into liquidation or to make drastic cutbacks to the scale of operations. Financial statements should be prepared under the going concern basis unless the entity is being (or is going to be) liquidated or if it has ceased (or is about to cease) trading. The directors of a company must also disclose any significant doubts about the company’s future if and when they arise. ( Agatha,2010) The main significance f the going concern concept is that the assets of the business should not be valued at their ‘break-up’ value, which is the amount that they would sell for it they were sold off piecemeal and the business were thus broken up. ii) The accruals concept (or matching concept): states that revenue and costs must be recognized as they are earned or incurred, not as money is received or paid. They must be matched with one another so far as their relationship can be established or justifiably assumed, and dealt with in the profit and loss account of the period to which they relate. ExampleAssume that a firm makes a profit of ? 100 by matching the revenue (? 200) earned from the sale of 20 units against the cost (? 100) of acquiring them. (Williamson,2001) If, however, the firm had only sold eighteen units, it would have been incorrect to charge profit and loss account with the cost of twenty units; there is still two units in stock. If the firm intends to sell them later, it is likely to make a profit on the sale. Therefore, only the purchase cost of eighteen units (? 90) should be matched with the sales revenue, leaving a profit of ? 90. The ba lance sheet would therefore look like this: ? | Assets| | Stock (at cost, i. e. 2 x ? 5)| 10| Debtors (18 x ? 10)| 180| | 190| Liabilities| | Creditors| 100| | 90| Capital (profit for the period)| 90| If, however the firm had decided to give up selling units, then the going concern concept would no longer apply and the value of the two units in the balance sheet would be a break-up valuation rather than cost. Similarly, if the two unsold units were now unlikely to be sold at more than their cost of ? 5 each (say, because of damage or a fall in demand) then they should be recorded on the balance sheet at their net realizable value (i. . the likely eventual sales price less any expenses incurred to make them saleable, e. g. paint) rather than cost. This shows the application of the prudence concept. In this example, the concepts of going concern and matching are linked. Because the business is assumed to be a going concern it is possible to carry forward the cost of the unsold units a s a charge against profits of the next period. Essentially, the accruals concept states that, in computing profit, revenue earned must be matched against the expenditure incurred in earning it. ii) The entity concept: The concept is that accountants regard a business as a separate entity, distinct from its owners or managers. The concept applies whether the business is a limited company (and so recognized in law as a separate entity) or a sole proprietorship or partnership (in which case the business is not separately recognized by the law. iv) The money measurement concept: The money measurement concept states that accounts will only deal with those items to which a monetary value can be attributed.For example, in the balance sheet of a business, monetary values can be attributed to such assets as machinery (e. g. the original cost of the machinery; or the amount it would cost to replace the machinery) and stocks of goods (e. g. the original cost of goods, or, theoretically, the pr ice at which the goods are likely to be sold). The monetary measurement concept introduces limitations to the subject matter of accounts. A business may have intangible assets such as the flair of a good manager or the loyalty of its workforce.These may be important enough to give it a clear superiority over an otherwise identical business, but because they cannot be evaluated in monetary terms they do not appear anywhere in the accounts. v) The historical cost concept: A basic concept of accounting is that resources are normally stated in accounts at historical cost, i. e. at the amount that the business paid to acquire them. An important advantage of this procedure is that the objectivity of accounts is maximized: there is usually objective, documentary evidence to prove the amount paid to purchase an asset or pay an expense.Historical cost means transactions are recorded at the cost when they occurred. In general, accountants prefer to deal with costs, rather than with ‘val ues’. This is because valuations tend to be subjective and to vary according to what the valuation is for. For example, suppose that a company acquires a machine to manufacture its products. The machine has an expected useful life of four years. At the end of two years the company is preparing a balance sheet and has decided what monetary amount to attribute to the asset. vi) The realization concept: Realization: Revenue and profits are recognized when realized.The concept states that revenue and profits are not anticipated but are recognized by inclusion in the income statement only when realized in the form of either cash or of other assets the ultimate cash realization of which can be assessed with reasonable certainty. vii) Duality concept: This concept ensures that transactions are recorded in books at least in two accounts, if one account is debited it’s also credited with the same amount in a different account. The recording system is also known as double entry system. Assets = Liabilities + Capital.Every transaction has a two-fold effect in the accounts and is the basis of double entry bookkeeping. b) Accounting conventions Conventions, unlike concepts, are guidelines derived by usage and practice. They are guidelines that arise from the practical application of accounting principles. An accounting convention is not a legally-binding practice; rather, it is a generally-accepted convention based on customs, and is designed to help accountants overcome practical problems that arise out of the preparation of financial statements. As customs change, so to will accounting conventions.Basically, conventions fill in the gaps between guidelines and practical usage. If an accounting regulatory body sets forth a guideline that addresses the same topic as the accounting convention, the accounting convention will no longer be applicable. Concepts supersede conventions. i) The consistency concept states that in preparing accounts consistency should be observed in two respects. a)Similar items within a single set of accounts should be given similar accounting treatment. b)The same treatment should be applied from one period to another in accounting for similar items.This enables valid comparisons to be made from one period to the next. (Crovit,2008) An accounting method used in one accounting period should be the same as the method used for events or transactions which are materially similar in other period (i. e. accounting practices should remain unchanged from period to period ). This also involves treatment of transaction and valuation method. Consistency is also advisable so that the comparison of accounting figures over time is meaningful. Consistency also states that if a change becomes necessary, the change and its effect should be clearly stated. i) The materiality concept: An item is considered material if it’s omission or misstatement will affect the decision making process of the users. Materiality depends on t he nature and size of the item. Only items material in amount or in their nature will affect the true and fair view given by a set of accounts. An error that is too trivial to affect anyone’s understanding of the accounts is referred to as immaterial. In preparing accounts it is important to assess what is material and what is not, so that time and money are not wasted in the pursuit of excessive detail.Determining whether or not an item is material is a very subjective exercise. There is no absolute measure of materiality. It is common to apply a convenient rule of thumb (for example to define material items as those with a value greater than 5% of the net profit disclosed by the accounts). But some items disclosed in accounts are regarded as particularly sensitive and even a very small misstatement of such an item would be regarded as a material error. An example in the accounts of a limited company might be the amount of remuneration paid to directors of the company.The as sessment of an item as material or immaterial may affect its treatment in the accounts. For example, the profit and loss account of a business will show the expenses incurred by he business grouped under suitable captions (heating and lighting expenses, rent and rates expenses etc); but in the case of very small expenses it may be appropriate to lump them together under a caption such as ‘sundry expenses’, because a more detailed breakdown would be inappropriate for such immaterial amounts. a)If a balance sheet shows fixed assets of ? million and stocks of ? 30,000 an error of ? 20,000 in the depreciation calculations might not be regarded as material, whereas an error of ? 20,000 in the stock valuation probably would be. In other words, the total of which the erroneous item forms part must be considered. b)If a business has a bank loan of ? 50,000 balance and a ? 55,000 balance on bank deposit account, it might well be regarded as a material misstatement if these two a mounts were displayed on the balance sheet as ‘cash at bank ? ,000’. In other words, incorrect presentation may amount to material misstatement even if there is no monetary error. iii) The Prudence convention (conservatism): The prudence convention ( classified as a concept by some others) states that where alternative procedures, or alternative valuations, are possible, the one selected should be the one that gives the most cautious presentation of the business’s financial position or results.This policy tends to understate rather than overstate net assets and net income, and therefore lead entities to â€Å"play safe†. In accounting, it states that when choosing between two solutions, the one that will be least likely to overstate assets and income should be selected. According to this concept â€Å"expected losses are losses but expected gains are not gains†. On the basis of this concept closing stock is valued at cost price or market price, whic hever is lower. Provisions for bad and doubtful debts are maintained.Therefore, revenue and profits are not anticipated but are recognized by inclusion in the profit and loss account only when realized in the form of either cash or of other assets the ultimate cash realization of which can be assessed with reasonable certainty: provision is made for all liabilities (expenses and losses) whether the amount of these is known with certainty or is best estimate in the light of the information available. (Pixley,2002) Assets and profits should not be overstated, but a balance must be achieved to prevent the material overstatement of liabilities or losses.The other aspect of the prudence concept is that where a loss is foreseen, it should be anticipated and taken into account immediately. If a business purchases stock for ? 1,200 but because of a sudden slump in the market only ? 900 is likely to be realized when the stock is sold the prudence concept dictates that the stock should be val ued at ? 900. It is not enough to wait until the stock is sold, and then recognize the ? 300 loss; it must be recognized as soon as it is foreseen. (Pixley,2002) A profit can be considered to be a realized profit when it is in the form of: †¢Cash Another asset that has a reasonably certain cash value. This includes amounts owing from debtors, provided that there is a reasonable certainty that the debtors will eventually pay up what they owe. Example A company begins trading on 1 January 20X2 and sells goods worth ? 100,000 during the year to 31 December. At 31 December there are debts outstanding of ? 15,000. Of these, the company is now doubtful whether ? 6,000 will ever be paid. The company should make a provision for doubtful debts of ? 6,000. Sales for 20Ãâ€"5 will be shown in the profit and loss account at their full value of ? 00,000, but the provision for doubtful debts would be a charge of ? 6,000. Because there is some uncertainty that the sales will be realized in th e form of cash, the prudence concept dictates that the ? 6,000 should not be included in the profit for the year. iv) Objectivity (neutrality): An accountant must show objectivity in his work. This means he should try to strip his answers of any personal opinion or prejudice and should be as precise and as detailed as the situation warrants. The result of this should be that any number of accountants will give the same answer independently of each other.Objectivity means that accountants must be free from bias. They must adopt a neutral stance when analyzing accounting data. In practice objectivity is difficult. Two accountants faced with the same accounting data may come to different conclusions as to the correct treatment. It was to combat subjectivity that accounting standards were developed. v) Full disclosure It states that information that might affect the judgments of the users of financial information should be presented in the main body of financial statements or in the not es or as supplementary information.Amounts and kinds of information disclosed should be decided based on a tradeoff analysis as a larger amount of information costs more to prepare than to use. Information disclosed should be enough to make a judgment while keeping costs reasonable. QUESTION TWO: Clashing accounting concepts and conventions that might bring about inconsistency in the accounting process Accounting concepts or conventions could clash or there could be inconsistency between them in such a way that users may have more than one definite method of treating items in the financial statements hence causing uncertainty.Examples include: 1. Clash between the accruals/matching concept and the prudence convention The accruals concept requires future income (e. g. in relation to credit sales) to be accrued. On the other hand the prudence concept dictates that caution should be exercised, so that if there is doubt about the subsequent receipt, no accrual should be made. There is a clash in that credit sales should be recognised immediately the sale is made (regardless of payment) under accrual concept while prudence states that incomes be recognized only when receipt is certain.A good example would be the treatment of deferred revenue expenditures that are usually spread over a number of years, during which the organisation is expected to earn additional revenue out of the expenditure. While this treatment is an accepted principle, there may be a counter-treatment, argued by another group, to charge the item as an expense, the entire amount in the year it was spent, on the grounds of conservatism/prudence. In other words, there may be a direct clash between the accruals and conservatism principles. 2.Clash between the historical cost concept and Prudence convention The prudence convention states that where alternative procedures, or alternative valuations, are possible, the one selected should be the one that gives the most cautious presentation of the busin ess’s financial position or results. Therefore it requires that stocks should always be valued at the lowest of cost or net realisable value. Net realisable value is the selling price of the stock minus any costs involved in getting this stock into saleable condition (e. g. repair costs).This means that we can value stock at current market rates, but only if the selling price is lower than the cost. However, if the replacement cost of these stocks is lower than cost or net realisable value then it may seem prudent to use the replacement cost to value these stocks. On the other hand, the historical cost concept implies that all assets acquired, service rendered or received, expenses incurred etc. should be recorded in the books at the price at which it was acquired (its cost price). The cost is distinct from its value and the record does not signify the value.It also holds that cost is the most reliable and verifiable value at which a good is or services should be initially re cognized. Therefore in determining inventory prices, the two principles may clash in application. QUESTION THREE: Solutions to the clashing accounting concepts and conventions William (2001) outlines basic rules that should be observed in applying particular accounting concepts in case of conflict. He states that despite the fact that most of the concepts have been universally accepted, accountants quite often come across situations where two concepts are in onflict and one overrides the application of the other. These are situations where an accountant will find it necessary to apply his professional skill and judgment to come up with the best possible solution. To quote from IAS 1, â€Å"There are many different accounting policies in use even in relation to the same subject: judgment is required in selecting and applying those which, in the circumstances of the enterprise, are best suited to present properly its financial position and the results of its operation. † 1. Sol ution to the clash between accruals and prudence When there is a clash between the two, prudence prevails.Although the accruals concept is universally accepted in trading and manufacturing organizations, there are occasions when the concept of conservatism overrides the application of the accruals concept. A typical example would be the accounts prepared for professional firms of accountants, lawyers and medical practitioners. In these accounts, recognition is generally given to the accruals concept insofar as it relates to expenses. In computing the incomes, however, a rather conservative approach is followed and only those items that are actually realized are accounted for in the accounts.This treatment has been accepted by the accountancy profession on the grounds of conservatism, although it generally defeats the concept of the accruals concept. When the accountant has a choice between two alternative treatments, remember, he should select the one that shows a less encouraging p osition of the financial situation. To follow the principle of conservatism is not easy; and good judgment is necessary to decide the right course of action. There is however, a great deal of difference between being conservative and being over conservative.The rule of conservatism should not be stretched to the point where it might eventually result in distorting the financial results. For example, capital items such as buildings, vehicles, machinery etc, which are capitalized in accordance with Generally Accepted Accounting Principles (GAAPs), must always be capitalized and no deviation should be recommended on the grounds of conservatism. 2. Solution to the clash between historical cost concept and Prudence convention Williamson (2001) states that prudence should prevail over the historical cost concept.This is important in order for financial statements to avoid overstating profits or disguising losses which may lead users to make wrong decisions. An example is that of fixed ass ets which should be valued at their historical cost (because it is objective). However, it is prudent to reduce their values to reflect wear and tear so as not to overstate profits. Also, according to the accruals concept, we should match an expense to when it was incurred. Therefore, fixed assets should appear as their historical cost less any depreciation.Also, the cost of these assets should be ‘spread' over their lifetime in the accounts. REFERENCES 1. Agatha J. , Mengyu and W. ,Askew S. ,(2010). â€Å"The Switch from US GAAP to IFRS†. Proceedings of the Northeast Business & Economics Association 48–54 2. Arens A. , and Loebbecke, J. , â€Å"Auditing, an integrated approach†, 1980 Prentice Hall 3. Carruthers, Bruce G. , & Espeland, Wendy Nelson, Accounting for Rationality: Double-Entry Bookkeeping and the Rhetoric of Economic Rationality, American Journal of Sociology, Vol. 7, No. 1, July 1991, pp. 40-41,44 46 4. Crovitz, L. (2008). â€Å"Closing the Information GAAP†. The Wall Street Journal vol III 5. Oldroyd, David & Dobie, Alisdair: Themes in the history of bookkeeping, The Routledge Companion to Accounting History, London, July 2008 6. Pixley, Francis William: Accountancy—constructive and recording accountancy (Sir Isaac Pitman & Sons, Ltd, London, 2002) 7. Williamson, D. (2001), Accounting Business Spreadsheeting, Prentice Hall, London Accounting Concepts, Conventions and Solutions Table of Contents QUESTION ONE: Accounting Concepts and Conventions1 a)Accounting Concepts1 i)The going concern concept. 1 ii)The accruals concept (or matching concept)1 iii)The entity concept:3 iv)The money measurement concept:3 v)The historical cost concept:4 vi)The realization concept:4 vii)Duality concept:4 b)Accounting conventions5 QUESTION TWO: Clashing accounting concepts and conventions that might bring about inconsistency in the accounting process9 1. Clash between the accruals/matching concept and the prudence convention9 2. Clash between the historical cost concept and Prudence convention9QUESTION THREE: Solutions to the clashing accounting concepts and conventions11 REFERENCES13 QUESTION ONE: Accounting Concepts and Conventions a) Accounting Concepts Accounting Concepts are broad basic assumptions that underlie the periodic financial accounts of business enterprises. They outline the rules of accounting that should be followed in preparation of all financial statements. T hese concepts are outlined in the International Accounting Standard 1(IAS 1)-presentation of financial statements. The word ‘concept’ in this context means an idea or thought that has a universal application.This includes; i) The going concern concept: implies that the business will continue in operational existence for the foreseeable future, and that there is no intention to put the company into liquidation or to make drastic cutbacks to the scale of operations. Financial statements should be prepared under the going concern basis unless the entity is being (or is going to be) liquidated or if it has ceased (or is about to cease) trading. The directors of a company must also disclose any significant doubts about the company’s future if and when they arise. ( Agatha,2010) The main significance f the going concern concept is that the assets of the business should not be valued at their ‘break-up’ value, which is the amount that they would sell for it they were sold off piecemeal and the business were thus broken up. ii) The accruals concept (or matching concept): states that revenue and costs must be recognized as they are earned or incurred, not as money is received or paid. They must be matched with one another so far as their relationship can be established or justifiably assumed, and dealt with in the profit and loss account of the period to which they relate. ExampleAssume that a firm makes a profit of ? 100 by matching the revenue (? 200) earned from the sale of 20 units against the cost (? 100) of acquiring them. (Williamson,2001) If, however, the firm had only sold eighteen units, it would have been incorrect to charge profit and loss account with the cost of twenty units; there is still two units in stock. If the firm intends to sell them later, it is likely to make a profit on the sale. Therefore, only the purchase cost of eighteen units (? 90) should be matched with the sales revenue, leaving a profit of ? 90. The ba lance sheet would therefore look like this: ? | Assets| | Stock (at cost, i. e. 2 x ? 5)| 10| Debtors (18 x ? 10)| 180| | 190| Liabilities| | Creditors| 100| | 90| Capital (profit for the period)| 90| If, however the firm had decided to give up selling units, then the going concern concept would no longer apply and the value of the two units in the balance sheet would be a break-up valuation rather than cost. Similarly, if the two unsold units were now unlikely to be sold at more than their cost of ? 5 each (say, because of damage or a fall in demand) then they should be recorded on the balance sheet at their net realizable value (i. . the likely eventual sales price less any expenses incurred to make them saleable, e. g. paint) rather than cost. This shows the application of the prudence concept. In this example, the concepts of going concern and matching are linked. Because the business is assumed to be a going concern it is possible to carry forward the cost of the unsold units a s a charge against profits of the next period. Essentially, the accruals concept states that, in computing profit, revenue earned must be matched against the expenditure incurred in earning it. ii) The entity concept: The concept is that accountants regard a business as a separate entity, distinct from its owners or managers. The concept applies whether the business is a limited company (and so recognized in law as a separate entity) or a sole proprietorship or partnership (in which case the business is not separately recognized by the law. iv) The money measurement concept: The money measurement concept states that accounts will only deal with those items to which a monetary value can be attributed.For example, in the balance sheet of a business, monetary values can be attributed to such assets as machinery (e. g. the original cost of the machinery; or the amount it would cost to replace the machinery) and stocks of goods (e. g. the original cost of goods, or, theoretically, the pr ice at which the goods are likely to be sold). The monetary measurement concept introduces limitations to the subject matter of accounts. A business may have intangible assets such as the flair of a good manager or the loyalty of its workforce.These may be important enough to give it a clear superiority over an otherwise identical business, but because they cannot be evaluated in monetary terms they do not appear anywhere in the accounts. v) The historical cost concept: A basic concept of accounting is that resources are normally stated in accounts at historical cost, i. e. at the amount that the business paid to acquire them. An important advantage of this procedure is that the objectivity of accounts is maximized: there is usually objective, documentary evidence to prove the amount paid to purchase an asset or pay an expense.Historical cost means transactions are recorded at the cost when they occurred. In general, accountants prefer to deal with costs, rather than with ‘val ues’. This is because valuations tend to be subjective and to vary according to what the valuation is for. For example, suppose that a company acquires a machine to manufacture its products. The machine has an expected useful life of four years. At the end of two years the company is preparing a balance sheet and has decided what monetary amount to attribute to the asset. vi) The realization concept: Realization: Revenue and profits are recognized when realized.The concept states that revenue and profits are not anticipated but are recognized by inclusion in the income statement only when realized in the form of either cash or of other assets the ultimate cash realization of which can be assessed with reasonable certainty. vii) Duality concept: This concept ensures that transactions are recorded in books at least in two accounts, if one account is debited it’s also credited with the same amount in a different account. The recording system is also known as double entry system. Assets = Liabilities + Capital.Every transaction has a two-fold effect in the accounts and is the basis of double entry bookkeeping. b) Accounting conventions Conventions, unlike concepts, are guidelines derived by usage and practice. They are guidelines that arise from the practical application of accounting principles. An accounting convention is not a legally-binding practice; rather, it is a generally-accepted convention based on customs, and is designed to help accountants overcome practical problems that arise out of the preparation of financial statements. As customs change, so to will accounting conventions.Basically, conventions fill in the gaps between guidelines and practical usage. If an accounting regulatory body sets forth a guideline that addresses the same topic as the accounting convention, the accounting convention will no longer be applicable. Concepts supersede conventions. i) The consistency concept states that in preparing accounts consistency should be observed in two respects. a)Similar items within a single set of accounts should be given similar accounting treatment. b)The same treatment should be applied from one period to another in accounting for similar items.This enables valid comparisons to be made from one period to the next. (Crovit,2008) An accounting method used in one accounting period should be the same as the method used for events or transactions which are materially similar in other period (i. e. accounting practices should remain unchanged from period to period ). This also involves treatment of transaction and valuation method. Consistency is also advisable so that the comparison of accounting figures over time is meaningful. Consistency also states that if a change becomes necessary, the change and its effect should be clearly stated. i) The materiality concept: An item is considered material if it’s omission or misstatement will affect the decision making process of the users. Materiality depends on t he nature and size of the item. Only items material in amount or in their nature will affect the true and fair view given by a set of accounts. An error that is too trivial to affect anyone’s understanding of the accounts is referred to as immaterial. In preparing accounts it is important to assess what is material and what is not, so that time and money are not wasted in the pursuit of excessive detail.Determining whether or not an item is material is a very subjective exercise. There is no absolute measure of materiality. It is common to apply a convenient rule of thumb (for example to define material items as those with a value greater than 5% of the net profit disclosed by the accounts). But some items disclosed in accounts are regarded as particularly sensitive and even a very small misstatement of such an item would be regarded as a material error. An example in the accounts of a limited company might be the amount of remuneration paid to directors of the company.The as sessment of an item as material or immaterial may affect its treatment in the accounts. For example, the profit and loss account of a business will show the expenses incurred by he business grouped under suitable captions (heating and lighting expenses, rent and rates expenses etc); but in the case of very small expenses it may be appropriate to lump them together under a caption such as ‘sundry expenses’, because a more detailed breakdown would be inappropriate for such immaterial amounts. a)If a balance sheet shows fixed assets of ? million and stocks of ? 30,000 an error of ? 20,000 in the depreciation calculations might not be regarded as material, whereas an error of ? 20,000 in the stock valuation probably would be. In other words, the total of which the erroneous item forms part must be considered. b)If a business has a bank loan of ? 50,000 balance and a ? 55,000 balance on bank deposit account, it might well be regarded as a material misstatement if these two a mounts were displayed on the balance sheet as ‘cash at bank ? ,000’. In other words, incorrect presentation may amount to material misstatement even if there is no monetary error. iii) The Prudence convention (conservatism): The prudence convention ( classified as a concept by some others) states that where alternative procedures, or alternative valuations, are possible, the one selected should be the one that gives the most cautious presentation of the business’s financial position or results.This policy tends to understate rather than overstate net assets and net income, and therefore lead entities to â€Å"play safe†. In accounting, it states that when choosing between two solutions, the one that will be least likely to overstate assets and income should be selected. According to this concept â€Å"expected losses are losses but expected gains are not gains†. On the basis of this concept closing stock is valued at cost price or market price, whic hever is lower. Provisions for bad and doubtful debts are maintained.Therefore, revenue and profits are not anticipated but are recognized by inclusion in the profit and loss account only when realized in the form of either cash or of other assets the ultimate cash realization of which can be assessed with reasonable certainty: provision is made for all liabilities (expenses and losses) whether the amount of these is known with certainty or is best estimate in the light of the information available. (Pixley,2002) Assets and profits should not be overstated, but a balance must be achieved to prevent the material overstatement of liabilities or losses.The other aspect of the prudence concept is that where a loss is foreseen, it should be anticipated and taken into account immediately. If a business purchases stock for ? 1,200 but because of a sudden slump in the market only ? 900 is likely to be realized when the stock is sold the prudence concept dictates that the stock should be val ued at ? 900. It is not enough to wait until the stock is sold, and then recognize the ? 300 loss; it must be recognized as soon as it is foreseen. (Pixley,2002) A profit can be considered to be a realized profit when it is in the form of: †¢Cash Another asset that has a reasonably certain cash value. This includes amounts owing from debtors, provided that there is a reasonable certainty that the debtors will eventually pay up what they owe. Example A company begins trading on 1 January 20X2 and sells goods worth ? 100,000 during the year to 31 December. At 31 December there are debts outstanding of ? 15,000. Of these, the company is now doubtful whether ? 6,000 will ever be paid. The company should make a provision for doubtful debts of ? 6,000. Sales for 20Ãâ€"5 will be shown in the profit and loss account at their full value of ? 00,000, but the provision for doubtful debts would be a charge of ? 6,000. Because there is some uncertainty that the sales will be realized in th e form of cash, the prudence concept dictates that the ? 6,000 should not be included in the profit for the year. iv) Objectivity (neutrality): An accountant must show objectivity in his work. This means he should try to strip his answers of any personal opinion or prejudice and should be as precise and as detailed as the situation warrants. The result of this should be that any number of accountants will give the same answer independently of each other.Objectivity means that accountants must be free from bias. They must adopt a neutral stance when analyzing accounting data. In practice objectivity is difficult. Two accountants faced with the same accounting data may come to different conclusions as to the correct treatment. It was to combat subjectivity that accounting standards were developed. v) Full disclosure It states that information that might affect the judgments of the users of financial information should be presented in the main body of financial statements or in the not es or as supplementary information.Amounts and kinds of information disclosed should be decided based on a tradeoff analysis as a larger amount of information costs more to prepare than to use. Information disclosed should be enough to make a judgment while keeping costs reasonable. QUESTION TWO: Clashing accounting concepts and conventions that might bring about inconsistency in the accounting process Accounting concepts or conventions could clash or there could be inconsistency between them in such a way that users may have more than one definite method of treating items in the financial statements hence causing uncertainty.Examples include: 1. Clash between the accruals/matching concept and the prudence convention The accruals concept requires future income (e. g. in relation to credit sales) to be accrued. On the other hand the prudence concept dictates that caution should be exercised, so that if there is doubt about the subsequent receipt, no accrual should be made. There is a clash in that credit sales should be recognised immediately the sale is made (regardless of payment) under accrual concept while prudence states that incomes be recognized only when receipt is certain.A good example would be the treatment of deferred revenue expenditures that are usually spread over a number of years, during which the organisation is expected to earn additional revenue out of the expenditure. While this treatment is an accepted principle, there may be a counter-treatment, argued by another group, to charge the item as an expense, the entire amount in the year it was spent, on the grounds of conservatism/prudence. In other words, there may be a direct clash between the accruals and conservatism principles. 2.Clash between the historical cost concept and Prudence convention The prudence convention states that where alternative procedures, or alternative valuations, are possible, the one selected should be the one that gives the most cautious presentation of the busin ess’s financial position or results. Therefore it requires that stocks should always be valued at the lowest of cost or net realisable value. Net realisable value is the selling price of the stock minus any costs involved in getting this stock into saleable condition (e. g. repair costs).This means that we can value stock at current market rates, but only if the selling price is lower than the cost. However, if the replacement cost of these stocks is lower than cost or net realisable value then it may seem prudent to use the replacement cost to value these stocks. On the other hand, the historical cost concept implies that all assets acquired, service rendered or received, expenses incurred etc. should be recorded in the books at the price at which it was acquired (its cost price). The cost is distinct from its value and the record does not signify the value.It also holds that cost is the most reliable and verifiable value at which a good is or services should be initially re cognized. Therefore in determining inventory prices, the two principles may clash in application. QUESTION THREE: Solutions to the clashing accounting concepts and conventions William (2001) outlines basic rules that should be observed in applying particular accounting concepts in case of conflict. He states that despite the fact that most of the concepts have been universally accepted, accountants quite often come across situations where two concepts are in onflict and one overrides the application of the other. These are situations where an accountant will find it necessary to apply his professional skill and judgment to come up with the best possible solution. To quote from IAS 1, â€Å"There are many different accounting policies in use even in relation to the same subject: judgment is required in selecting and applying those which, in the circumstances of the enterprise, are best suited to present properly its financial position and the results of its operation. † 1. Sol ution to the clash between accruals and prudence When there is a clash between the two, prudence prevails.Although the accruals concept is universally accepted in trading and manufacturing organizations, there are occasions when the concept of conservatism overrides the application of the accruals concept. A typical example would be the accounts prepared for professional firms of accountants, lawyers and medical practitioners. In these accounts, recognition is generally given to the accruals concept insofar as it relates to expenses. In computing the incomes, however, a rather conservative approach is followed and only those items that are actually realized are accounted for in the accounts.This treatment has been accepted by the accountancy profession on the grounds of conservatism, although it generally defeats the concept of the accruals concept. When the accountant has a choice between two alternative treatments, remember, he should select the one that shows a less encouraging p osition of the financial situation. To follow the principle of conservatism is not easy; and good judgment is necessary to decide the right course of action. There is however, a great deal of difference between being conservative and being over conservative.The rule of conservatism should not be stretched to the point where it might eventually result in distorting the financial results. For example, capital items such as buildings, vehicles, machinery etc, which are capitalized in accordance with Generally Accepted Accounting Principles (GAAPs), must always be capitalized and no deviation should be recommended on the grounds of conservatism. 2. Solution to the clash between historical cost concept and Prudence convention Williamson (2001) states that prudence should prevail over the historical cost concept.This is important in order for financial statements to avoid overstating profits or disguising losses which may lead users to make wrong decisions. An example is that of fixed ass ets which should be valued at their historical cost (because it is objective). However, it is prudent to reduce their values to reflect wear and tear so as not to overstate profits. Also, according to the accruals concept, we should match an expense to when it was incurred. Therefore, fixed assets should appear as their historical cost less any depreciation.Also, the cost of these assets should be ‘spread' over their lifetime in the accounts. REFERENCES 1. Agatha J. , Mengyu and W. ,Askew S. ,(2010). â€Å"The Switch from US GAAP to IFRS†. Proceedings of the Northeast Business & Economics Association 48–54 2. Arens A. , and Loebbecke, J. , â€Å"Auditing, an integrated approach†, 1980 Prentice Hall 3. Carruthers, Bruce G. , & Espeland, Wendy Nelson, Accounting for Rationality: Double-Entry Bookkeeping and the Rhetoric of Economic Rationality, American Journal of Sociology, Vol. 7, No. 1, July 1991, pp. 40-41,44 46 4. Crovitz, L. (2008). â€Å"Closing the Information GAAP†. The Wall Street Journal vol III 5. Oldroyd, David & Dobie, Alisdair: Themes in the history of bookkeeping, The Routledge Companion to Accounting History, London, July 2008 6. Pixley, Francis William: Accountancy—constructive and recording accountancy (Sir Isaac Pitman & Sons, Ltd, London, 2002) 7. Williamson, D. (2001), Accounting Business Spreadsheeting, Prentice Hall, London

Review of Chart of Accounts †Philippines Essay

Review of Chart of Accounts – Philippines Questions and Suggested Answers 1. In China GAAP, the bonds or stocks purchased are categorized as â€Å"Held-for-trading† or â€Å"Available for sale† or â€Å"Long term investment†, based on the purpose of purchase. Does Philippine GAAP have similar categorization? Philippine client want to separate the marketable securities to current or non-current, it means short or long term, right? Answer: The Philippine Financial Reporting Standards (PFRS) [based from International Financial Reporting Standards (IFRS)] classifies â€Å"Investment in Bonds† and â€Å"Investments in Stocks† as financial assets. For this purpose, investments in bonds or stocks are classified as: ? Trading securities (debt or equity securities) o o ? ? â€Å"Financial assets at fair value through profit or loss† by requirement â€Å"Financial assets at fair value through profit or loss† by designation Available-for-sale securities (debt or equity securities) Held-to-maturity securities (debt securities only) These investments are classified as either current (short-tem) or noncurrent (long-term) assets. The account name â€Å"Long-term investment† is not among the financial assets classification in PFRS. Current investments are investments that are by their very nature are readily realizable and are intended to be held for not more than one year. Debt Trading securities Available-forsale v v Equity v v Current v Noncurrent Current or Noncurrent v – Maybe classified as current or noncurrent depending on whether they are intended to be held within one year or for more than one year v Held-tomaturity v 2 For instance, trading securities are normally classified as current assets because these investments are expected to be realized within twelve (12) of the balance sheet date. Noncurrent financial assets are investments other than current investments. This residual definition means that the noncurrent investments are intended to be held for more than one year or are not expected to be realized within twelve months after the end of the reporting period. Trading Securities or Held-for-trading Securities The first category of financial assets under PAS 39 is called â€Å"financial assets at fair value through profit or loss†. This category includes two types of financial assets, they are: A. Financial assets that are held for trading or popularly known as â€Å"trading securities