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Chapter Eight
Accounting: Decision Making by the Numbers
Review Questions
1. How do public accountants differ from management accountants? Who are the key users
of the accounting information? What type of information does each stakeholder group
need?
Public accountants provide services such as tax planning and preparation, external
auditing, and business consulting on topics such as employee compensation and benefits
to clients on a fee basis. Management accountants work within a single company,
recording, and analyzing the financial information for their employer. They may do a
variety of tasks including budgeting and cost and asset management.
Accounting information is valuable to many different stakeholders. Owners of businesses
want to know whether their firms are generating an adequate return on their investment.
Banks and other lenders want to know whether the organization will be able to repay its
debts. Employees are interested in the financial performance of their company because it
has an impact on their job security, pay, and pension plans. Suppliers want to be sure
that the firm can pay for any supplies they provide on credit. Several government
agencies, including the IRS and SEC, also require information from financial statements
to insure that the firm is meeting tax and reporting requirements.
BUSPROG: Communication
Bloom’s: Knowledge
Topic: Accounting: Who Needs It—and Who Does It?
Difficulty Level: Easy
Learning Objective: 8-1
2. Financial statements are prepared using generally accepted accounting principles

(GAAP). What group is responsible for establishing these principles, and what goals
guide their formulation? Why are many generally accepted accounting principles likely to
change in the near future?
The Securities and Exchange Commission has the ultimate authority for establishing
generally accepted accounting principles (GAAP), but it has delegated the responsibility
for developing these rules to a private organization known as the Financial Accounting
Standards Board (or FASB).
The main purpose of GAAP is to give the external users of accounting information, such
as owners, creditors, suppliers and regulators, confidence in the quality and reliability of
the information they receive, and to enable them to use this information to make informed
decisions. The principles established by GAAP are designed to provide financial
statements that are:
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. EOC – 483
End-of-Chapter Solutions / Chapter 8
• Relevant: the information should be directly related to the firm’s financial

condition and performance.
• Reliable: the information should be based on sources that are accurate, objective,
and verifiable.
• Consistent: the information should be based on the same core assumptions and
procedures over time. (If a firm changes these procedures it should clearly
indicate the nature and impact of these changes.)
• Comparable: the information should be presented in a reasonably standardized
way so that users can easily compare results over time or among various
organizations.
The accounting practices of most other nations are based on a set of principles known as
the International Financial Reporting Standards (IFRS). These standards differ in
several respects from GAAP. For the past several years the FASB and its international
counterpart, the IASB have been working on ways to make the practice of financial
accounting in the United States more consistent among nations. The adoption of these
new practices will cause several changes in GAAP over the next several years.
Topic: The Role of the Financial Accounting Standards Board
3. State the “accounting equation” and define each of its terms. What is the logic behind this
equation? How is the structure of the balance sheet related to this equation?
The accounting equation states that Assets = Liabilities + Owners’ Equity. In this
equation, assets are the resources owned by a firm. These include the firm’s cash,
accounts receivable, inventory, machinery and equipment, buildings, land, and perhaps
even intangible assets such as patents, copyrights and goodwill.
Liabilities are the claims that outsiders have against the firm’s assets. They represent
what the firm owes to outsiders. A loan owed to a bank, trade credit (accounts payable)
owed to suppliers, bonds owed to bondholders, wages owed to employees and taxes owed
to the government are examples.
Owners’ Equity represents the claims of owners against the firm’s assets. These are
viewed as residual claims, since the claims of creditors come before those of owners. For
a corporation the key elements of owners’ equity would include common stock and
retained earnings.
The logic behind the accounting equation is based on the fact that firms must finance the
purchase of their assets, and owners and non-owners are the only two sources of funding.
The accounting equation tells us that the value of a firm’s assets must equal the amount
of financing provided by owners (as measured by owners’ equity) plus the amount
provided by creditors (as indicated by the firm’s liabilities) to purchase those assets.
EOC – 484 © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The balance sheet is organized in a way that illustrates the logic behind the accounting
equation. A balance sheet lists a firm’s assets first, organizing them into current assets,
plant and equipment and intangible assets. It sums the value of all of these assets to come
up with a value for the firm’s total assets. It then lists is liabilities (organized according
to when they are due) and owners’ equity. It sums the value of all total liabilities and
owners’ equity and shows that this total is equal to the value of total assets.
BUSPROG: Analytic
Bloom’s: Comprehension
Topic: The Balance Sheet: What We Own and How We Got It
Difficulty Level: Moderate
4. You have a company's balance sheet, its income statement, and its statement of cash
flows. Which would you refer to if you wanted to know if a company made a profit last
year? If you wanted to find out whether the firm had any intangible assets? If you wanted
to know why its cash balance had changed over the past year? If you wanted to know how
much debt the firm had used to finance its assets? If you wanted to know what the firm’s
operating expenses were for the past year?
The income statement reports the company’s revenues and expenses (including operating
expenses). It computes net income (profit or loss) by deducting costs and expenses from
revenue.
The balance sheet reports the type of assets a company has, including any intangible
assets. It also identifies the short-term and long-term liabilities, thus indicating the extent
to which the company relies on debt.
The statement of cash flows reports the inflows and outflows of cash resulting from
operating, investing, and financing activities. Thus, it shows how and why a firm’s cash
balance changed over the past year.
BUSPROG: Analytic
Bloom’s: Analysis
Topic: Financial Statements: Read All About Us
5. Describe the three basic categories of cash flows reported by a statement of cash flows
and give examples of specific cash flows included in each category.
The statement of cash flows shows how and why the firm’s cash position changed by
identifying the amount of cash that flowed into and out of the firm from three types of
activities. The three basic types of activities that generate cash flows are:
• Operating activities, which generate cash inflows from the sale of goods or
services, as well as cash from dividends and interest received from ownership of
the financial securities of other firms. Operating activities generate cash outflows
from the payment of operating expenses.
• Investing activities, which create cash flows from the purchase or sale of long-
term assets or long-term financial investments.
• Financing activities generate cash flows from issuing new securities and from the
payment of dividends or repayment of principal on loans.
Topic: The Statement of Cash Flows: Show Me the Money
6. Identify and describe the basic elements of an income statement. Explain how the accrual
basis of accounting guides the way the information on the income statement is reported.
The income statement summarizes the financial results of a firm’s operations over a
given period of time. The figure that attracts the most attention on the income statement
is net income, which measures the company’s profit or loss. This simple equation
illustrates the logic behind the organization of the income statement:
Revenue − Expenses = Net Income
In this equation revenue represents the increase in the amount of cash and other assets
(such as accounts receivable) the firm earns in a given time period as the result of its
business activities. A firm normally earns revenue by selling goods or by charging fees
for providing services (or both). Expenses indicate the cash a firm spends, or other assets
it uses up, to carry out the business activities necessary to generate its revenue. Net
income is the profit or loss the firm earns in the time period covered by the income
statement. If net income is positive, the firm has earned a profit. If it’s negative, the firm
has suffered a loss.
Accountants use accrual-basis accounting when recognizing revenues and expenses
reported on the income statement. Under the accrual approach, revenues are recorded
when they are earned and payment is reasonably assured. It’s important to realize that
this is not always when the firm receives cash from its sales. Under accrual-basis
accounting, expenses aren’t necessarily recorded when cash is paid. Instead, expenses
are matched to the revenue they help generate.
BUSPROG: Analytic
Topic: The Income Statement: So, How Did We Do?
7. What is the purpose of an external audit by an independent CPA firm? How does an
auditor go about conducting an audit? How does a qualified opinion by an auditor differ
from an unqualified opinion or an adverse opinion?
The purpose of the external audit is to verify that the statements were properly prepared
in accordance with generally accepted accounting principles, and that they fairly present
the financial condition of the firm. The results of the audit are presented in an
independent auditor’s report which is included in the annual report the firm sends to its
stockholders.
Because they must determine whether a company’s financial statements were properly
prepared in accordance with GAAP, external auditors don’t just check the final figures in
the statements; they also examine the accounting methods the company used to obtain
those figures. Auditors also look for signs of fraud or falsified records. They often
conduct an actual physical count of goods or supplies in inventory to determine the
accuracy of the figures reported in the company’s inventory records and contact the
company’s banker to verify its account balances. The audit process is rigorous, but it’s
important to realize that in large, public companies it would be impossible for auditors to
check the accuracy of every transaction.
If the auditor doesn’t find any problems with the way a firm’s financial statements were
prepared and presented, the report will offer an unqualified opinion (also referred to as a
clean opinion). If the auditor identifies limited problems with the firm’s accounting
methods or financial statements, but believes that in all other respect these statements are
fair and accurate, the report will express a qualified opinion. But when auditors discover
more serious and widespread problems with a firm’s statements they offer an adverse
opinion. An adverse opinion indicates that the auditor believes the information contained
in the statements was not prepared according to generally accepted accounting
principles and that the statements may be inaccurate and unreliable.
Topic: The Independent Auditor’s Report: Getting a Stamp of Approval
Difficulty Level: Comprehension
8. Describe the key differences between financial accounting and managerial accounting.
Financial accounting is responsible for generating information used primarily by outside

stakeholders such as investors, creditors, and government agencies. It does this by
developing financial statements such as the balance sheet, income statement, and
statement of cash flows. These are prepared on a fixed schedule and are based on
methods that are consistent with generally accepted accounting principles (GAAP).
Managerial accounting prepares reports and performs analysis that is designed
primarily for the internal use of the firm’s managers. These reports are prepared as
needed, and are not required to follow GAAP.
Topic: Inside Intelligence: The Role of Managerial Accounting
9. How do management accountants view cost? How do implicit costs differ from explicit
costs? Give some examples to illustrate the difference.
Accountants define cost as the value of what is given up in exchange for something else.
Depending on the type of problem they are analyzing, managerial accountants actually
measure and evaluate several different types of costs. At the most basic level, accountants
distinguish between out-of-pocket costs and opportunity costs. Out-of-pocket costs (also
called explicit costs) are usually easy to measure because they involve actual
expenditures of money or other resources. The wages a company pays to its workers, the
payments it makes to suppliers for raw materials, and the rent it pays for office space are
examples. But accountants realize that not all costs involve a monetary payment;
sometimes what is given up is the opportunity to use an asset in some alternative way.
Such opportunity costs are sometimes referred to as implicit costs. For example, if an
entrepreneur uses her own money to finance a business she gives up the opportunity to
invest those funds in some other way.
BUSPROG: Analytic
Topic: Cost Concepts: A Cost for All Reasons
10. What is the purpose of budgeting? What is the master budget, and what are its major
components? How does a top down budgeting process differ from a bottom up approach,
and what are the advantages and disadvantages of each?
Budgeting is a management tool that explicitly shows how firms will acquire and use the
resources needed to achieve its goals over a specific time period. This process is crucial
to the planning process because it translates goals into measurable quantities and forces
managers to explicitly identify how they will meet these goals. When done correctly,
budgeting encourages communication and cooperation among various departments and
functional areas of the business, provides a motivational tool, and helps managers
monitor progress and evaluate progress.
In reality, a firm prepares several different budgets. The master budget organizes all of
these separate budgets into a unified whole, providing a complete picture of the firm’s
financial plan. The key elements of the master budget include the sales budget,
production budget, various cost budgets and cash and capital budgets.
Top down budgeting occurs when top managers develop budgets with little input from
middle and supervisory managers. Bottom up (or participatory) budgeting is an approach
which seeks the active involvement of managers at all levels of the organization.
The advantages of this approach are that top managers are likely to have a better
understanding of the overall goals and priorities of the company, and are thus in a better
position to determine how financial and real resources should be allocated. Also, top
down management tends to be quicker and simpler than the bottom up approach. Finally,
it frees up time for middle and supervisory managers to pursue other responsibilities. But
this approach may alienate middle and first line managers, who may resent being given
no say in the process.
The advantages of bottom up budgeting are that middle and supervisory managers may be
“closer to the action” and have a better understanding of the resources needed to meet the
needs of their departments, divisions and teams. Allowing middle and first line managers to
be more actively involved in the process is likely to improve their morale and encourage
them to “buy in” to the budget. In addition to being more time consuming, another problem
with participatory budgeting is that some managers may be tempted to overstate their needs
or set low budget goals in order to make their jobs easier.
BUSPROG: Analytic
Topic: Budgeting: Planning for Accountability
Application Questions
1. You have recently graduated with an accounting degree. Use the Web to investigate what
exactly is involved in becoming a Certified Public Accountant (CPA). Good places to start
are Wikipedia's "Certified Public Accountant" entry and the Department of Labor's
Occupational Outlook Handbook entry on accountants and auditors. What advantages and
disadvantages do you see? Would you decide to take this step? Why or why not?
Requirements for CPAs vary among states, but in most states a CPA candidate must have
completed at least 150 hours of college coursework, which is 30 hours more than is
normally required for a bachelor’s degree. Candidates in all states must pass a rigorous
four-part Uniform CPA Examination. This exam is given over a two-day period, but the
candidate does not have to pass all four parts in the same period. More than half of all
states also require candidates to have some accounting experience. After earning
certification, CPAs in virtually all states must complete a certain number of hours of
continuing education to have their licenses renewed.
The requirements that must be met to become a CPA are challenging, but according to
the Occupational Outlook Handbook, successful candidates do enjoy substantial
increases in job opportunities and earnings potential. In fact, the Handbook forecasts
that accountants who earn the CPA should experience excellent job prospects over the
next several years.
BUSPROG: Technology
Topic: Accounting: Who Needs It—and Who Does It?
2. Today there are four dominant public accounting firms: PricewaterhouseCoopers, Ernst
& Young, KPMG, and Deloitte Touche Tohmatsu. But until about a decade ago there
was a fifth major public accounting firm known as Arthur Andersen. Do some research
on the Internet to find out how the “Big Five” became the “Big Four.” What lessons does
this story yield about the practice of public accounting? How does it relate to the
provisions in the Sarbanes-Oxley Act?
Students who research this question will learn more about the accounting scandals that
rocked the profession in the earliest years of the twenty-first century. The major reason
for Arthur Andersen’s demise was its involvement in the Enron scandals. Andersen was
the external auditor for Enron (and for some other firms facing accounting scandals
during this period), but it failed to question any of Enron’s unethical or deceptive
practices. Many scholars suggest that Andersen’s lax oversight was due to the fact that
the accounting firm had close business relationships with Enron. In fact, Andersen
typically made more money from consulting fees with Enron than it did from its audits.
Some critics maintain that this relationship meant that Andersen wasn’t really
independent and that it was reluctant to be aggressive in its audits for fear of losing the
more lucrative consulting business.
Andersen was convicted of obstruction of justice for shredding thousands of pages of
Enron-related documents upon learning it would be investigated by the Securities and
Exchange Commission. After the conviction Andersen voluntarily gave up its license to
practice public accounting. In 2005 the Supreme Court overturned Andersen’s
conviction, ruling that the judge had given instructions to the jury that were too vague,
leading them to make an erroneous decision. However, by the time the Supreme Court
made its ruling Arthur Andersen had lost its clients and suffered so much damage to its
reputation that it was not feasible to restart the business.
The fall of Arthur Andersen provided the impetus for a key provision of the Sarbanes-
Oxley Act (SOX)—namely the provision that external auditors must be independent of the
companies they audit. The act identified and prohibited several specific business
relationships between public accounting firms and the companies they audited. These
practices include bookkeeping services, financial system design, actuarial services,
management functions, and investment or broker-dealer services and several other
services.
BUSPROG: Ethics
Bloom’s: Application
Topic: Ethics in Accounting
3. The generally accepted accounting principles (GAAPs) developed by the Financial

Accounting Standards Board (FASB) try to make interpreting and comparing a firm's
financial performance easier for a variety of stakeholders. Those stakeholders include
suppliers, stockholders, creditors, and the government. Go to the FASB website and find
out more this board. Provide a brief overview of the board’s mission. Who are the current
members of the FASB and what are their qualifications? Given these backgrounds, do
you believe that the members of the FASB will adequately represent the interest of this
diverse set of stakeholders?
According to the FASB website, the board’s mission is “to establish and improve
standards of financial accounting and reporting for the guidance and education of the
public, including issuers, auditors, and users of financial information.”
At the time the book went to print the members of the FASB were Robert Herz, Thomas
Linsmeier, Leslie Seidman, Marc Siegel and Lawrence Smith, but its composition may be
different by the time the students check the website.
According to the FASB website the five members of the FASB serve full time and must
sever connections with the firms or institutions they served prior to joining the Board in
order to avoid the potential for conflicts of interest. While collectively they represent
diverse backgrounds, they must have an excellent knowledge of accounting, finance, and
business, and a concern for the public interest in matters of financial accounting and
reporting.
BUSPROG: Technology
4. The Financial Accounting Standards Board (FASB) is currently working with the
International Accounting Standards Board (IASB) to make U.S. financial accounting
standards more consistent with international standards. Use the Internet to find out why
the two boards are working toward convergence and how much progress they have made.
How would the convergence of the two sets of standards likely affect the practice of
financial accounting in the United States? How will these changes affect students just
beginning their study of accounting?
The main advantages of the move is that it will simplify the accounting process for firms
with global operations and make it easier for stakeholders to compare financial
statements of U.S. corporations with those in other countries. Although at present the
efforts of the FASB and IASB are focused on simply making the two systems more
consistent (which is referred to as convergence), the SEC has indicated on several
occasions that it would prefer to establish a single set of high-quality globally accepted
accounting standards. If this adoption of a single set of principles happens, it is much
more likely to be based on IFRS than on GAAP. The SEC has made a variety of
statements about this goal in recent years, establishing and then modifying guidelines for
when such a convergence would occur. This process is controversial, but many
authorities expect that it will happen. A recent report by PricewaterhouseCoopers

concluded that “ultimately we believe the United States will adopt IFRS.”
IFRS and GAAP differ in many ways, including when revenue is recognized, how
employee benefits are expensed, how nonfinancial assets are valued, how financial
derivatives are defined and accounted for, and how other financial instruments are
recognized and valued. (This identifies some of the differences that have attracted
attention, but it certainly is not a complete list.)
The challenges of the switch mainly involve the cost of switching procedures and the need
for accountants and other professionals to become more familiar with and proficient at
applying the new set of standards. The changes will also be a challenge for accounting
departments in colleges in universities. It will be important for them to modify their
curricula to adapt to changes as they occur. The good news for students just starting
their study of accounting is that they will get in on the ground floor of the changes, and
will have less to “unlearn” than students who studied accounting a few years ago.
BUSPROG: Diversity
Bloom’s: Synthesis
Difficulty Level: Challenging
5. Check out the most recent financial statements for a major U.S. corporation. Go to the
company’s website and find the link to investor relations. [This may take a bit of
searching. Not all corporate websites are laid out the same way, but almost all of them
contain a link to investor relations or investor information. It is often at the top of the
home page.] From the investor relations page, look for a link to the company’s annual
report. The financial statements will be presented in this report, along with a lot of other
information. Use information from these financial statements to answer the following
questions:
a. What amount of revenue did the firm earn in the most recent year?
b. What was its net income? Did it earn a profit or a loss?
c. How much cash did the company have?
d. What was the value of its accounts receivable—and what does this number
represent?
e. What was the total amount of current liabilities? What does this value represent?
f. What was the company’s net cash flow from investing activities?
Answers will vary depending on which corporation the student chooses. Revenues and net
income will be listed on the company’s income statement; cash, accounts receivable and
current liabilities will be listed on its balance sheet, and cash flows from investing and the
net increase or decrease in its cash balance will be listed on its statement of cash flows.
You might want to tell students that the names used for financial statements are not
always consistent. For example, balance sheets are often formally called statements of
financial position and income statements are sometimes called statements of net income
or profit and loss statements. Also, to simplify your grading you might limit the students
to a few corporations you select. For example, you might pick a few corporations that
have recently been in the news, or a few that are popular with students, or some of the
larger corporations with operations near your college or university. You could check out
the websites for each of these corporations to make sure that the link to investor relations
is easy to find.
BUSPROG: Analytic
Bloom’s: Analysis
Topic: Financial Statements: Read All About Us
Team Project
Pick out several publicly traded corporations, including some that you know are doing very well
financially and others that are struggling. Print out the most recent comparative financial
statements for each company. (Links to these statements are available on most financial websites
as well as the investor relationship pages of the firm’s websites.)
Break the class into small groups and give each group the financial statements for one of the
corporations. Tell the group to work together to find out what has happened over the past two
years to the firm’s total liabilities and stockholder’s equity, revenues, major costs and expenses,
net income and cash position and discuss what these figures tell them about the company’s
financial recent performance and current financial condition. Have each team report its findings
to the class and have the class discuss the results and compare the performance of the various
companies.
Case Connection
Budget Bashing Blues
The strategic planning session had degenerated into a gripe session—and you were one of the
biggest gripers. Your company’s CEO, Jan Draper, liked to keep planning sessions focused and
she usually did a good job of it. But she apparently sensed that this was a time when frustrated
managers needed to have their say. The meeting was attended by most of your company’s top
management team, and almost all of them appeared frustrated by the current budget process. The
key budget complaints brought up by the managers included:
• The current budgetary process takes too long and is too expensive. The company’s
approach to budgeting tries to get all levels of management involved. Everyone agreed
that this approach was good in theory. But in actual practice, middle and supervisory
managers frequently got bogged down and overwhelmed by the amount of time spent
dealing with budget issues.
• It appears that at least a few participants always try to “game the system” by purposefully
overstating their resource needs or understating their capabilities during the budget
process in order to make it easier to achieve their budget goals.
• The focus on meeting annual budget numbers encourages an emphasis on short-term

thinking rather than strategic thinking. For example, in order to stay within budget
managers sometimes defer needed purchases or repairs. Moreover, the focus on meeting
budget targets often prevents managers from thinking creatively.
• The budget is based on assumptions and forecasts that seldom turn out to be accurate—
often because of factors beyond the control of managers. For example, in 2008 and 2009
the dramatic economic decline made it impossible for managers to meet budget targets
that were formulated before the full impact of the recession was appreciated. Since
performance evaluations, bonuses and promotions are based on meeting budget numbers
this created a lot of stress and frustration.
Most managers agreed that the whole budget process needed rethinking. Rachel Sperling, the
youngest member of the top management team, argued for a more radical approach, suggesting
that the company abandon the annual budget process altogether. This was met by skepticism
(and even some derisive laughter), but Rachel held her ground. She mentioned that she had done
some research on a movement called “Beyond Budgeting” that called for more flexible planning
tools and evaluation of employees based on relative performance rather than fixed budget targets.
She pointed out that companies as well known and diverse as Google, Toyota, American Express
and Southwest Airlines have used Beyond Budgeting ideas to move away from traditional
budgeting methods.
CEO Draper let the discussion on budgets go on for several minutes before steering the meeting
back on track. But before turning back to the agenda she noted that budget issues were a topic
that clearly needed further research and discussion. She asked you (as one of the biggest gripers)
to work with Rachel to come up with some preliminary proposals that could be discussed at a
future meeting devoted to the budget process.
You Decide:
• Does your company currently use a top down or bottom up approach to budgeting? What
are the advantages and disadvantages of the current approach? Would a switch to the
other approach be beneficial? Why or why not?
Based on the description in the case, which mentions that the firm’s approach tries to get
everyone involved, the company currently appears to be using a bottom-up approach.
(Organizations that use this approach allow middle and supervisory managers to
participate actively in the creation of the budget.) Theoretically, this has some important
advantages. First, middle and supervisory managers are likely to know more about the
issues and challenges facing their departments—and the resources it will take to address
them—than top management. Second, middle and first-line managers are likely to be more
highly motivated to achieve budgetary goals when they have a say in how those goals are
developed. Finally, managers are more likely to believe a bottom-up process establishes
fair and reasonable goals—an important consideration because managers’ bonuses,
promotions and other rewards and incentives are often based on whether or not they meet
targets set by the budget. But there is also a negative side to this approach. A bottom-up
approach is more time consuming and resource intensive to carry out than the top-down
approach. Also, some middle managers may be tempted to overstate their needs or set low
budget goals in order to make their jobs easier—an outcome known as budgetary slack.
A top-down approach has top management take the lead role in the budget process, with
less reliance on input from middle and supervisory managers. This approach can be
faster and less expensive to implement, and it frees up time for middle and supervisory
managers to devote to other responsibilities. Also, top managers know the long-term
strategic needs of the company and are in a better position to see the big picture when
making budget decisions. But top managers may not know much about the specific
challenges faced by different divisions or functional areas. Also, a top down approach
may be resented by subordinates, resulting in less “buy-in” and lower morale.
There is no right or wrong answer to the question of whether the firm would be better of
with a more top-down approach—a case could be made either way. What is important is
that the student looks at both the benefits and drawbacks of both approaches and
compares their merits. (While there is no definitely right or wrong answer, it is worth
noting that most recent literature seems to support the bottom-up approach.)
BUSPROG: Analytic
Bloom’s: Analysis
Topic: Preparing the Budget: Top Down or Bottom Up?
• How could the budget process be modified to take changes in economic conditions into
account?
It appears that this company relies completely on a static budget. The firm could improve
its budget process by incorporating flexible budgets. A flexible budget is developed over
a range of possible sales levels, and is designed to show the appropriate budgeted level
of costs for each different level of sales. This flexibility enables managers to make more
meaningful comparisons between actual costs and budgeted costs, and makes it possible
to compensate for changes in economic conditions that are beyond management control.
BUSPROG: Analytic
Topic: Being Flexible: Clearing Up Problems With Static
• Rachel is really serious about abandoning the annual budget. She also suggests that you
do some research on the Beyond Budgeting (BB) movement. Do some research to find
out more about Beyond Budgeting. What are the major criticisms BB makes against the
traditional approach to budgeting? What core concepts and values does BB suggest as
replacements for the traditional approach? What are some problems associated with the
BB approach? On balance, do you think this approach is worth pursuing? Explain.
According to the BB movement traditional budgeting:

1. Is too detailed, time consuming and expensive
2. Is often out of date within a few months
3. Is not flexible enough to deal with rapidly changing competitive environments
4. Perpetuates a narrow focus on short-term results and undermines long-term
strategic thinking
5. Discourages managers from thinking creatively and being flexible
6. Encourages “gaming the system” and unethical behavior
(Note: this is not a complete list, but it gets at the essence of the BB criticism.)
The BB approach encompasses a different set of concepts and values. Beyond Budget
advocates make the following suggestions:
1. Scrap the traditional budget process; make planning a continuous, inclusive and
dynamic process rather than an annual event.
2. Focus on a common cause, not a central plan
3. Make information open and transparent
4. Encourage ambitious goals, but (unlike traditional budgeting) don’t turn them
into fixed targets
5. Focus on accountability and continuous improvement rather
6. Base performance review on relative performance, not fixed targets
(Again, this isn’t a complete list, but it gets at the essence of the BB approach without
getting bogged down in the details—see the links above for more details. It is important
to note that BB doesn’t call for a standardized approach to planning and control, but
rather adherence to a general set of principles.)
Many students are likely to agree with some of the criticisms of traditional budgeting and
to agree that the principles of the BB approach seem good on paper. But before
recommending this type of approach they should show an awareness of the challenges it
would bring. For most firms, (including the one in this case) a Beyond Budgeting
approach would require a revolution in the way they plan, the way they evaluate workers
and the way managers view their responsibilities and their relationships with others in
the organization. There is no simple blueprint for bringing about such a dramatic
transformation. Only firms with visionary and dynamic leaders are likely to successfully
pull it off. (The Beyond Budgeting literature does contain a number of success stories of
firms that have successfully replaced the traditional budgeting process with a more
flexible and dynamic system, but such firms are still relatively rare.)
BUSPROG: Reflective Thinking

Bloom’s: Evaluation
Topic: Budgeting: Planning for Accountability
Sources: “Budget Process,” Online Success Center website:

http://onlinesuccesscentre.com/2010/07/how-to-prepare-a-sound-budget-process-six-
steps-in-the-budgeting-process-bottom-up-versus-top-down-budget-plans/; “How
Budgeting Works for Companies,” by Jonas Elmerraji, Investopedia website:
http://www.investopedia.com/articles/07/budgetingforcompanies.asp#axzz1Uf9fws5m;
“The Advantages of a Flexible Budget,” by Kathy Adams McIntosh, eHow.com website:
http://www.ehow.com/info_7779199_advantages-flexible-budget.html; “What Is the
Problem?” Beyond Budgeting Roundtable website: http://www.bbrt.org/beyond-
budgeting/bb-problem.html; “Benefits of Beyond Budgeting to Your Organization,”
Beyond Budgeting Roundtable website: http://www.bbrt.org/beyond-budgeting/bb-
ben.html; “Performance Management Beyond Budgeting: Why You Should Consider It,
How It Works, and Who Should Contribute to Make It Work,” by Jürgen Daum,
Juergendaum.com website: http://www.juergendaum.com/news/06_08_2002.htm.
Another random document with
no related content on Scribd:
time it receives numerous presentations from foreigners. The ancient original
Icelandic MSS. have all been removed to Denmark, so that here there is now
nothing very old to be seen, except what has been reprinted. With great
interest we turned over the leaves of a copy of Snorre Sturleson’s
“Heimskringla,” and the “Landnáma Bok,” shewn us by the librarian and
learned scholar Mr. Jón Arnason.
The hotel at Reykjavik is merely a kind of tavern, with a billiard room for the
French sailors to play, lounge, and smoke in; a large adjoining room, seated
round, for the Reykjavik fashionable assemblies; a smaller room up stairs, and
some two or three bedrooms. On reaching it we were received by the landlord
and shewn up stairs, where we found Mr. Bushby, who gave us a most
courteous English welcome, notwithstanding our unintentional intrusion. He
had, that morning, when the steamer came in sight, set out and ridden along
the coast from the sulphur mines at Krisuvik—perhaps one of the wildest
continuous rides in the world—to meet Captain Forbes.
Knowing the scant accommodation at the landlord’s disposal, he at once
placed the suite of rooms he had engaged at our service, to dress and dine in,
thus proving himself a friend in need. A good substantial dinner was soon
under weigh, and rendered quite a success by the many good things with
which Mr. Bushby kindly supplemented it, contributing them from his own
private stores.
Mr. Gísli Brynjúlfsson, the young Icelandic poet—employed in antiquarian
researches by the Danish Government chiefly at Copenhagen, but at present
here because he is a member of the Althing or Parliament now sitting—joined
us at table, having been invited by Dr. Mackinlay. He speaks English fluently,
and gave us much interesting information. He kindly presented me with a
volume “Nordurfari,” edited by himself and a friend, and containing amongst
other articles in prose and verse, “Bruce’s Address at Bannockburn,” translated
into Icelandic, in the metre of the original. This northern version of Burns’
poem may interest the reader.[5]
BANNOCK-BURN
ÁVARP ROBERT BRUCE TIL HERLITHS SINS.
EPTIR BURNS.
Skotar, er Wallace vördust med

Vig med Bruce opt hafid sjed;
Velkomnir ad blódgum bed,
Bjartri eda sigurfraegd!
Stund og dagur dýr nú er;
Daudinn ógnar hvar sem sjer;
Jatvards ad oss aedir her—
Ok og hlekkja naegd!
Hverr vill bera nidings nafn?

Ná hver bleydu sedja hrafn?
Falla thrael ófrjálsum jafn?
Flýti hann burtu sjer!
Hverr vill hlinur Hildar báls

Hjör nu draga hins góda máls,
Standa bædi og falla frjáls?
Fari hann eptir mjer!
Ánaudar vid eymd og grönd!

Ydar sona thrældóms bönd!
Vjer viljum láta lif og önd,
En leysa úr hlekkjum thá!
Fellid grimma fjendur thví!

Frelsi er hverju höggi í!
Sjái oss hrósa sigri ný
Sól, eda ordna ad ná!
After finally arranging with Zöga to start for the Geysers at 8 o’clock next
morning, Dr. Mackinlay, Mr. Haycock, Professor Chadbourne and I took a
walk through the town, called for Dr. Hjaltalin, who unfortunately was not at
home, and strolled along to the churchyard. It is surrounded by a low stone
and turf wall. We gathered forget-me-nots, catch-flies, saxifrage and butter-
cups among the grass; observed artificial flowers, rudely made of muslin and
worsted, stuck upon a grave, but do not know if this is an Icelandic custom or
the work of the stranger over the last resting place of a comrade.
Looking down upon Reykjavik from the elevation on which we stand all is
bright in the mellow glare of evening; the windows of the houses gleam in the
sun like the great jewel of Ghiamsheed; the near Essian mountains have a
ruddy glow, and the bay, intensely blue, is gay with vessels and flags.
Gazing inland all is one wild dreary black lava waste—miles upon miles of
bog, stones and blocks of rock. Botanized for an hour with the Professor.
On returning saw several heaps of large cod-fish heads, piled up near the sod-
roofed houses of the fishermen in the outskirts of the town. On enquiry we
were told that the heads of fish dried for exportation are thus retained; the
people here eat them, and one head is said to be a good breakfast for a man.
Most of the houses in and around Reykjavik have little plots of garden-ground
surrounded with low turf walls. In these we generally observed common
vegetables such as parsley, turnips, potatoes, cresses, a few plants for salads,
&c.; here and there a currant bush, and sometimes a few annuals or other
flowers. These, however, seldom come to any great degree of perfection, and
are often altogether destroyed; for the climate is severe and very changeable,
especially in the southern portion of the island.
REYKJAVIK.
The Governor called at the hotel for Mr. Haycock and me, insisted on us
taking the loan of his tent, and kindly invited us to come along and spend the
evening with him. As we had to start in the morning for the Geysers for the
present we declined the proferred hospitality, but promised to call on our
return.
ICELANDIC LADY IN FULL DRESS.
As there was not accommodation for us at the hotel, we were rowed off to the
“Arcturus” by the indefatigable Zöga at half-past 10 o’clock at night, and slept
on board.
ROUTE TO THINGVALLA.
RIDE TO THE GEYSERS.
Friday morning, July 29. Landed from the steamer between 7 and 8 o’clock, and
found the baggage and riding horses with the relays, twenty-four in all,
assembled at the hotel court; Zöga the guide, with his brother and a boy who
were also to accompany us, busy adjusting saddles, stirrup straps, &c. For four
days we shall be thrown entirely upon our own resources, so that provisions,
tent, plaids and everything we are likely to need during a wilderness journey,
must be taken with us. Our traps had been sent on shore late on the previous
evening. The mode of loading the sumpter ponies is peculiar; a square piece of
dried sod is placed on the horses back, then a wooden saddle with several
projecting pins is girded on with rough woollen ropes; to either side of the
saddle, is hooked on, a strong oblong wooden box generally painted red; while
on the pins are hung bags, bundles, and all sorts of gipsy looking gear. These
need frequent re-adjustment from time to time as the ponies trot along, one
side will weigh up the other, or the animals get jammed together and knock
their loads out of equilibrium, the saddles then perhaps turn round and articles
fall rattling to the ground. The strong little boxes are constructed and other
arrangements made with a view to such contingencies, and however primitive,
rude, or outlandish they may at first seem to the stranger, he will soon come to
see the why and the wherefore, and confess their singular adaptation to the
strange and unique exigences of Icelandic travel.
The baggage train at length moved off, accompanied by the relief ponies,
which were tied together in a row, the head of the one to the tail of the other
before it.
Dr. Mackinlay, Mr. Bushby, Mr. Sievertsen, and other acquaintances came to
see us start. Equipped with waterproofs and wearing caps or wide-awakes, no
two of us alike, at half-past eight o’clock, a long straggling line of non-descript
banditti-looking cavaliers, all in excellent spirits and laughing at each other’s
odd appearance, we rode at a good pace out of Reykjavik.
“Rarely it occurs that any of us makes this journey on which I go,”[6] words
spoken to Dante by his guide, in the ninth Canto of the Inferno, forcibly
suggested themselves to me as I “entered on the arduous and savage way,” and
gazed around on the “desert strand.”
The road terminated when we reached the outskirts of the town, and the track
lay over a wild black stony waste with little or no vegetation; everything
seemed scorched. The relay ponies were now loosed from each other, and,
perfectly free, driven before us like
“A wild and wanton herd,
Or race of youthful and unhandled colts,
Fetching mad bounds, bellowing and neighing loud,
Which is the hot condition of their blood.”
They were apt to scatter in quest of herbage, but Zöga, when his call was not
enough or the dogs negligent, quickly out-flanked the stragglers, upon which,
they, possessed by a salutary fear of his whip, speedily rejoined their fellows.
We soon lost sight of the sea, and in a short time came to the Lax-elv—or
salmon river—which we forded.
Enormous quantities of fish are taken at the wears a little higher up where
there are two channels and an arrangement for running the water off, first
from the one and then from the other, leaving the throng of fishes nearly dry
in a little pool from which they are readily taken by the hand. The fishermen
wear rough woollen mittens to prevent the smooth lithe fish from slipping
through their fingers when seizing them by head and tail, to throw them on
shore. From five hundred to a thousand fishes are sometimes taken in a day.
The fishery is managed by an intelligent Scotchman sent here by a merchant in
Peterhead who leases the stream and has an establishment of some fifteen tin-
smiths constantly at work making cans for “preserved salmon.” The fish are
cut into pieces, slightly boiled—then soldered and hermetically sealed up in
these tin cases containing say 2 or 4 ℔s. each, and sent south packed in large
hogsheads to be distributed thence over the whole world.
The few grass-farms we saw were like hovels; many separate erections, stone
next the ground, the gable wood, and the roof covered with green sod. The
rafters are generally made of drift wood or whale’s ribs. Turf is used as fuel;
but in common Icelandic houses there is only one fire—that in the kitchen—
all the year round. The beds are often mere boxes ranged around the room, or,
where there is such accommodation, underneath the roof round the upper
apartment, which is approached by a trap-stair. They are filled with sea-weed
or feathers and a cloth spread over them. In the farm houses we entered there
was a sad want of light and fresh air; in fact, these sleeping rooms were so
close and stifling that we were glad to descend and rush out to the open air for
breath.
The little bit of pet pasture land, round each farm, enclosed by a low turf wall,
is called “tun,” a word still used in rural districts of Scotland—spelt toon, or
town—with the same sound and similar signification.
Rode many miles through wild black desolate dreary volcanic wastes—no near
sounds but the metallic bicker of our ponies’ hoofs over the dry rocks and
stones, or fearless splashing through mud puddles—and no distant sounds
save the eerie cries, tremulous whistlings and plaintive wails of the curlew,
plover, and snipe. Observed the abrasions of the ice-drift very distinctly traced
on the rocks, these all running nearly south-west. The slightly elevated rock-
surface was frequently polished quite smooth, scratches here and there
showing the direction of the friction by which this appearance had been
produced. In some instances the rock was left bare, in others detached stone
blocks of a different formation rested on the surface.
Wild geranium, saxifrage, sedum, and tufts of sea-pink are very common,
when we come to anything green. The wild geranium, from the almost
nightless summer of the north, is six times larger than in Britain, and about the
size of a half-penny.
RAVINE.
Came to a deep ravine, wild, horrid, and frightful; rode along the edge of it,
and then through dreadfully rough places, with nothing to mark the track;
amidst great and little blocks of stone—trap, basalt, and lava—mud-puddles—
up-hill, down-hill, fording rivers, and through seemingly impassible places; yet
the Icelandic horse goes unflinchingly at it. Mr. Haycock says it would be sheer
madness to attempt such break-neck places in England; there, no horse would
look at it; steeple-chasing nothing to it. His horse was repeatedly up to the
girths in clayey mud, and recovered itself notwithstanding its load as if it were
nothing to pause about. Truly these are wonderful animals, they know their
work and do it well.
Came to a grassy plot, in a hollow by a river’s side, where we halted, changed
the saddles and bridles to the relief ponies, and, clad in mackintosh, thankfully
sat down on the wet grass to rest, while we ate a biscuit and drank of the
stream. In the course of the day, we had come to several green spots, like oasis
in the black desert, where the horses rested for a short time to have a feed of
grass.
After starting, ascended for about an hour through a ravine, where we saw
some lovely little glades full of blae-berries—sloe,—low brushwood, chiefly of
willows and birch, and a profusion of flowers, such as wild geranium, thyme,
dog-daisy, saxifrage, sea-pink, catch-fly, butter-cup, a little white starry flower,
and diapensia; the latter is found, here and there, in round detached patches of
fresh green like a pincushion, gaily patterned with little pink flowers. I am
indebted to Professor Chadbourne for the name of it. Obtained a root of this
plant for home, and gathered flowers of the others to preserve.
We now came to an elevated plateau which stretched away—a dreary stony
moor—bounded in one direction by the horizon-line and in another by hills of
a dark brown colour. Here there was not a patch of verdure to be seen; all one
black desert lava-waste strewn with large boulders and angular slabs, lying
about in all conceivable positions. In riding, one required to keep the feet in
constant motion, to avoid contact with projecting stones, as the ponies picked
their way among them. Our feet consequently were as often out of the stirrups
as in them. Shakspere says “Wisely and slow, they stumble that run fast;” not
so, however, with the sure footed Icelandic ponies; for, even over such ground,
they trotted at a good pace and no accident befell us.
I generally rode first with Zöga the guide, or last with Professor Chadbourne.
The driving of the relief horses before us, like a stampedo, and the keeping of
them together afforded some of us much amusement as we rode along. Here
no sheep or cattle could live. It was literally “a waste and howling wilderness.”
We saw several snow-birds and terns flying about, and often heard the eerie
plaintive whistle of the golden plover. These birds were very tame and
examined us with evident curiosity. They would perch on a large lava block
before us, quite close to our track, and sit till we came up and passed—then fly
on before, to another block, and sit there gazing in wonder; and so on for
miles. They had evidently never been fired at. Mr. Murray humanely remarked
that it would be murder to shoot them! In this black stony plateau there was
often not the least vestige of a track discernible; but we were kept in the right
direction by cairns of black stones placed here and there on slight elevations.
These guiding marks—“varder” as they are called—are yet more needed when
all the surface is covered with snow; then, “vexed with tempest loud,” Iceland
must resemble Milton’s description of Chaos.
“Far off,
Dark, waste and wild under the frown of night,
Starless exposed and ever threatening storms
Of Chaos blustering round.”
We saw one rude house of refuge, without any roof, built of lava blocks, in the
midst of this black desert where everything seemed blasted. Came now on
spots where a few tufts of sea-pinks, and many bright coloured wild-flowers
were springing up among the stones. Saw flat rock-surfaces shrivelled up and
wrinkled like pitch, an effect which had evidently been produced when the lava
was cooling; others were ground down and polished smooth in grooves by the
ice-drift. As near as I can calculate, some fourteen or fifteen miles of our
journey lay over this one long long dreary stony waste, henceforth, ever to be
associated in memory with the plover’s wild lone plaintive tremulous whistle.
At 3 P.M. we came in sight of the blue lake of Thingvalla,[7] lying peacefully in
the valley before us; while the range of the hills beyond it, bare, bold and
striking in their outline, was mostly of a deep violet colour.
During the day, arrowy showers of drenching rain “cold and heavy,” like that
described by Dante in the third circle of the Inferno, or wet drizzling mists had
alternated with gleams of bright clear sunshine. Towards the afternoon the
weather had become more settled and the effect of the prospect now before
us, although truly lovely in itself, was heightened by our previous monotonous
though rough ride over the dreary stony plateau. The lake far below us, with its
two little volcanic islands Sandey and Nesey, lay gleaming in the sun like a
silver mirror; while the wild scenery around forcibly reminded us of
Switzerland or Italy.
Thingvalla was to be our resting place for the night, and seeing our destination
so near at hand in the valley below us, some one purposed a rapid scamper,
that we might the sooner rest, eat, and afterwards have more leisure to explore
the wondrous features of the place. Forthwith we set off at a good pace, but
the Professor was too tired to keep up with us, so I at once fell behind to bear
him company. The others were speedily out of sight. Knowing that dinner
preparations would occupy Zöga for some time after his arrival, we rode
leisurely along, admiring the green level plain far below us. When wondering
how we were to get down to it, we suddenly and unexpectedly came to a
yawning chasm or rent running down through the edge of the plateau. It
seemed about 100 feet deep, 100 feet wide, and was partially filled with
enormous blocks of basalt which had toppled down from either side; where
more, cracked and dissevered, still impended, as if they might fall with a crash
at the slightest noise or touch. This was the celebrated Almanna Gjá or
Chasm, of which we had read so much but of which we had been able to form
no adequate idea from descriptions.
Of a scene so extraordinary, indeed unique, I can only attempt faithfully to
convey my own impressions, without hoping to succeed better than others
who have gone before me.
Let the reader imagine himself, standing on the stony plateau; below him
stretches a beautiful verdant valley, say about five miles broad, and about 100
feet below the level on which he is standing; to the right before him also lies
the lake which we have been skirting for some miles in riding along. It is in
size about ten miles each way, and is bounded by picturesque ranges of bare
volcanic hills. This whole valley has evidently sunk down in one mass to its
present level, leaving exposed a section of the rent rocks on either side of the
vale. These exposed edges of the stony plateau running in irregular basaltic
strata, and with fantastic shapes on the top like chimneys and ruined towers,
stretch away like black ramparts for miles, nearly parallel to each other, with
the whole valley between them, and are precipitous as walls, especially that on
the left.
The top of the mural precipice, overlooking the gorge at our feet, is the
original uniform level of the ground before the sinking of the valley. It forms
the edge of the plateau which stretches away behind and also before us to the
left of the precipice; for we look down the chasm lengthways, along the front
of the rock-wall, and not at right angles from it. A mere slice of the rock has
been severed and is piled up on our right, like a Cyclopian wall. It runs parallel
with the face of the rent rock to which it formerly belonged, for, say, about the
eighth of a mile N.E. from where we stand, and then terminates abruptly there
in irregular crumbling blocks like a heap of ruins; while the trench or gjá itself
also runs back in a straight line S.W. for about two miles, and terminates at the
brink of the lake.
The N.E. side of the valley is the highest, and the S.W. the lowest—shelving
beneath the blue water, and forming the bottom of the lake. The river Oxerá,
which thunders over the rock-wall on the right, forms a magnificent waterfall,
and then flows peacefully across the south-west corner of the valley to the
lake.
Between these two rock-walls—the left forming the real boundary of the
valley on that side, but the right wall being only a slice severed from the left,
and not the other boundary of the valley, which is situated about five miles
distant—a long narrow passage descends, leading to the plain below. The flat
bottom of this passage 100 feet deep is strewn with debris, but otherwise
covered with tender green sward. The bottom is reached from the elevated
waste where we stand by a very rough irregular winding incline plane—for
although the descent is full of great blocks of stones, dreadfully steep, and liker
a deranged staircase than anything else, we still call it a steep incline plane from
the level of the plateau to the passage beneath which leads into the valley—
high rock-walls rising on either side as we descend. Entering the defile and
moving along on level ground, the wall on the right, evidently rent from the
other side as if sliced down with some giant’s sword from the edge of the
plateau, soon terminates in the valley; but that on the left runs on for many
miles like a fire-scathed rampart. The stony plateau stretches back from the
edge or level of the summit of this rock-wall, and the lovely green valley of
Thingvalla extends from its base to the Hrafna Gjá or Raven’s Chasm—the
corresponding wall and fissure, like rampart and fosse—which bounds the
other side of the valley.
I am thus particular, because certain descriptions led me to suppose that here
we would encounter a precipice at right angles to our path, and have to
descend the face of it, instead of descending an incline parallel to its face, from
where the stair begins on the old level. As it is, however, it seemed quite steep
enough, with the rock-walled incline reaching from the valley to our feet. This
wild chasm is called the Almanna Gjá—all men’s or main chasm; while the one
on the other side of the vale of Thingvalla is called the Hrafna Gjá or Raven’s
Chasm. The whole character of the scene, whether viewed by the mere tourist,
or dwelt upon by the man of science, is intensely interesting, and in several
respects quite unique; hence I have tried to describe it so minutely.
When Professor Chadbourne and I came up to it, we gazed down in awe and
wonder. We knew that our companions must have descended somehow, for
there was no other way: but how, we could not tell. Were we to dismount and
let the horses go first, they might escape and leave us; if we attempted to lead
them down they might fall on the top of us; to descend on foot would be
extremely difficult at any time, and dismounting and mounting again at this
stage of our proceedings, was rather a formidable undertaking. “How shall we
set about it?” I asked my friend. “You may do as you please,” said he, “but I
must keep my seat if I can.” “So shall I, for the horse is surer footed than I can
hope to be to-day.” “Lead on then” said the Professor, “and I’ll follow!”
So leaving my pony to choose its steps, it slowly picked its way down the steep
gorge; zig-zagging from point to point and crag to crag, or stepping from one
great block of stone to another. I was repeatedly compelled to lean back,
touching the pony’s tail with the back of my head, in order to maintain the
perpendicular, and avoid being shot forward, feet first, over its head, among
the rocks. Sometimes at steep places it drew up its hind legs and slid down on
its hams, many loose stones rattling down along with us as the pony kicked out
right and left to keep its balance, and made the sparks fly from its heels.
Descending in silence, at last we reached the bottom in safety, thinking it
rather a wild adventure in the way of riding, and one not to be attempted
elsewhere.
DESCENT INTO THE ALMANNA GJÁ.
Looking back with awe and increasing wonder at the gorge we had descended,
for it certainly was terrifically steep, we both remarked the cool indifference
and utter absence of fear with which we had ridden down such a break-neck
place. The fresh air and excitement prevent one from thinking anything about
such adventures till they are over.
ALMANNA GJÁ.
The high rock-walls, now hemming us in on either side, bore a considerable

resemblance to the pictures of Petra—Wady Mousa—in Arabia, and here we
could fancy mounted Bedouins riding up with their long matchlocks. All was
silent as the grave. The ground was green with tender herbage; great blocks of
stone lay about, and others seemed ready to topple over and fall down upon
us. Riding along, the rocks on the right soon terminated like a gigantic heap of
burned ruins, and allowed us to gaze across the vale of Thingvalla, with the
river Oxerá in the foreground. Here we overtook our friends who told us that
they had all dismounted and led their horses down the chasm, and would
scarcely believe that we had ridden down. All of us were lost in wonder and
struck with awe at the scenes we had witnessed. We forded the river in a row,
following Zöga’s guidance; and at 5 o’clock in the afternoon rode up to the
priest’s house on the other side. It was simply a farm, like others we had seen,
consisting of a group of separate erections with wooden gables, green sod on
the roof and the whole surrounded with a low stone wall coped with turf.
Beside it was the silent churchyard with its simple grassy graves of all sizes.
Immediately behind the house were piles of sawn timber, and several
carpenters at work rebuilding the little church, which having become old and
frail had been taken down. Its site was only about 25 feet by 10.
FORDING THE OXERÁ.
Zöga went in to tell the pastor of our arrival, leaving us to dismount in a deep
miry lane between two rough stone walls leading to the house. He had been
busy with his hay, but speedily appeared and hospitably offered us what shelter
he could afford.
Zöga arranged for the grazing of the ponies; we were to dine in the largest
room of the house, and he was to have the use of the kitchen fire to cook our
dinner—the preserved meats, soups, &c.—which of course we had brought
with us. The pastor provided a splendid trout from the river, to the great
delectation of half a dozen travellers all as hungry as hawks.
PRIEST’S HOUSE AT THINGVALLA.
Now commenced the unstrapping and unpacking, presided over by the

indefatigable Zöga; boxes, bags, and packages, bespattered with mud, lay about
singly and in piles. Everybody seemed to want something or other which was
stowed away somewhere, and forthwith the patient obliging Zöga, in a most
miraculous manner, never failed to produce the desiderated articles. Taking a
rough towel and soap, I performed my ablutions in the river close by, while
dinner was getting ready and felt quite refreshed. “Time and the hour runs
through the roughest day,” and this was certainly one to be marked in our
calender. Shortly after 6 o’clock we dined and attempted some conversation in
Latin with the priest, Mr. S. D. Beck. He is a pastor literally and metaphorically,
farming and fishing as well as preaching. Hay, however, is the only crop which
is raised here; and the Icelanders are consequently very dependent upon the
hay-harvest. With their short summer they might not inappropriately quote
Shakspere’s lines,
“The sun shines hot; and if we use delay
Cold biting winter mars our hoped for hay.”
The scythe used by the Icelanders is quite straight and not half the length of
ours. The numerous little hummocks, with which pasture land is covered,
necessitate the use of a short implement, so that it may mow between and
around them; the hillocks are from one to two feet high, and from one to four
feet across. In some places the ground presents quite the appearance of a
churchyard or an old battle-field. These elevations are occasioned by the
winter’s frost acting on the wet subsoil. If levelled they would rise again to the
same height in about 7 or 8 years; but the farmers let them alone, because they
fancy they get a larger crop from the greater superficial area of the field, and
this old let-alone custom certainly saves them much labour. The primitive state
of their agriculture, as well as the peculiar nature of the Icelandic soil, may be
inferred from the fact, that there are only two ploughs in the whole island and
no carts. A spade, a scythe two feet long, a small rake with teeth about an inch
and a half deep, and ropes made of grass or hair to bind the hay, which is
carried on men’s backs or conveyed by horses to be stacked, are all that the
farmer requires for his simple operations. The hay, especially that which grows
in the túns, is of fine quality, tender and nutritive; and, with even any ordinary
attention to drainage, many a fertile vale could be made to yield much more
than is now obtained from it. Latin was our only mode of communicating
directly with the priest; but having had little colloquial practice of that kind, we
blundered on, feeling that, in appropriating the stately language of Cicero and
Virgil to creature comforts and the vulgar ongoings of daily life, we were
almost committing a species of desecration: yet the ludicrous combinations
and circumlocutions, grasped at in desperation to express modern things in a
dead language, afforded us no little amusement. Professor Chadbourne, Mr.
Murray, and myself got most of the work to do, and were often greeted with
the pastor’s goodnatured “Ita,” or “Intelligo,” when our propositions could
not have been particularly remarkable for perspicacity. Amongst foreigners,
charity covers a multitude of sins of this kind. We cannot however apply the
same remark to our own countrymen, who are often more inclined to laugh at
a foreigner’s mistakes than to help him.
The fragrant tedded hay and the green vale of Thingvalla stretching before us
were peculiarly refreshing to the eye, after the dreary rugged lava-wastes
through which we had passed—where tracks of flat rocks were corrugated and
shrivelled up like pitch, having been left so when the lava set; and where other
rock-surfaces appeared ground and polished in grooves by the ice-drift; or
where all was covered with a pack of lava blocks and slabs, of all sizes and
lying in every conceivable direction.
After tea I walked out alone a little way north-west of the church to examine
the Althing, on the upper part of which stands the Lögberg or sacred law hill,
where, when the Parliament or Althing was assembled, the judges sat; and
where justice was administered to the Icelanders for nearly 900 years; thus
rendering Thingvalla, with its numerous associations and stirring memories, to
speak historically, by far the most interesting spot in the island.
ALTHING AND LÖGBERG FROM BEHIND THE CHURCH.
The Althing is a long sloping ridge of lava, about 200 feet long and from 30 to
50 broad, covered on the top with the most tender herbage and flowers. At the
end next the church it is low and approachable, by climbing over a few stones
among and below which one can see water, but it is entirely separated from the
surrounding plain by two deep perpendicular rocky fissures or chasms running
parallel on either side and joining at the further end. Only at one place is the
chasm so narrow—16 feet—that, once on a time, Flosi, leader of the burners
of Njal’s house, made his escape from justice by taking a desperate leap. These
chasms contain clear water, so that the Althing is in fact a narrow peninsula,
which with the entrance guarded was as secure as a fortress. One looks sheer
down, say 20 or 30 feet, to the surface of the water in the chasms; while the
water itself is from 80 to 90 feet deep, and in some places said to be
unfathomable. These fissures run S.W. to the lake which is about a mile distant.
Through the water, one sees huge blocks of lava of a whitish blue colour and
dark masses of basalt gleaming from the green depths. Beautiful tender fairy-
like ferns grow on the edges and in the sheltered crevices of the rocks; and I
gathered specimens of grasses, mosses, violets, butter-cups and forget-me-
nots, from the soft verdant carpet which covered the surface. Here, the
Icelandic Parliament, such as it was, continued to meet, down to the year 1800,
when the seat of government was finally removed to Reykjavik.
In the old palmy days, prior to A.D. 1261 when the island became subject to
Norway, the Althing was the scene of many a spirited debate; affairs of the
greatest import were here freely discussed, and finally disposed of, in open
assembly. Thus, in the year A.D. 1000, after a stormy debate, it was determined
that Christianity should be introduced as the religion of the island. Here,
measures of general interest were proposed, taxes levied, law-suits conducted,
the judgments of inferior courts revised, subordinate magistrates impeached
for dereliction of duty and dismissed from their office; while criminals were
tried, and if found guilty of capital offences were summarily executed.
Criminals were beheaded on the little Island of Thorlevsholm in the Oxerá; in
a pool of the same river, female offenders, sewed in a sack, were drowned; and
those condemned for witchcraft were precipitated from the top of a high rock
on the east side of the Almannagjá.
The Althing commonly met in the middle of May and sat for 14 days. Every
freeholder had a right to attend and express his opinion on measures under
consideration: thus, at Thingvalla, friends and acquaintances from distant parts
of the island—members and friends of both sexes—annually availed
themselves of this opportunity of meeting each other. The people pitched their
tents on the banks of the Oxerá and in the plain around the Althing; so that a
wild lone scene usually silent as the grave, for the time became quite a busy
one, enlivened by the presence of nearly all the elite of the island.
LAKE OF THINGVALLA FROM THE LÖGBERG.

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BUSN 5 5th Edition Kelly Solutions

2. Financial statements are prepared using generally accepted accounting principles

• Relevant: the information should be directly related to the firm’s financial

Revenue − Expenses = Net Income

Financial accounting is responsible for generating information used primarily by outside

3. The generally accepted accounting principles (GAAPs) developed by the Financial

authorities expect that it will happen. A recent report by PricewaterhouseCoopers

• The focus on meeting annual budget numbers encourages an emphasis on short-term

According to the BB movement traditional budgeting:

BUSPROG: Reflective Thinking

Sources: “Budget Process,” Online Success Center website:

Skotar, er Wallace vördust med

Hverr vill bera nidings nafn?

Hverr vill hlinur Hildar báls

Ánaudar vid eymd og grönd!

Fellid grimma fjendur thví!

DESCENT INTO THE ALMANNA GJÁ.

The high rock-walls, now hemming us in on either side, bore a considerable

Now commenced the unstrapping and unpacking, presided over by the

ALTHING AND LÖGBERG FROM BEHIND THE CHURCH.

LAKE OF THINGVALLA FROM THE LÖGBERG.

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