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EDMONDS / OLDS

Introductory FINANCIAL
ACCOUNTING
for Business
f­inancial ­performance. In other words, the text shows students how to use ratios, as
well as how to calculate them.
In addition, the text includes a separate chapter, Chapter 14, which provides in-
depth coverage of the analysis of financial statements. This chapter includes two full
sets of exercises, problems, and test bank material, along with all the Connect fea-
tures. Finally, the ­appendices of the text include two comprehensive financial state-
ment analysis projects. One pertains to Target’s 10K annual report, which is included in
the text. The other is an open-ended project that allows the instructor or the student to
choose the company to be analyzed.
Once students understand how events affect statements, the next step is under-
standing how to analyze statements. The choice to cover financial statement analysis
(FSA) at the introductory level really depends on the level of your students. We provide
thorough coverage of FSA for the introductory level, but we separate it in such a way
that covering this topic is left to the discretion of the professor.

● COMPREHENSIVE COVERAGE
Moving to a sequential learning approach does not change the content. It changes
how the content is structured. This text includes all topics that are normally covered in
a traditional introductory financial accounting book, including debits, credits, and all of
the typical recording procedures associated with the double-entry accounting system.
Indeed, focusing on a conceptual understanding of accounting before covering proce-
dural details provides a better foundation for more advanced courses.

vii
ABOUT THE AUTHORS
Christopher T. Edmonds
Christopher T. Edmonds, Ph.D., is an Associate Professor in the Department of Accounting and
Finance at the UAB Collat School of Business. He is the course coordinator for the face-to-face and
online principles of accounting courses. Dr. Edmonds specializes in teaching and developing
engaging face-to-face and online introductory accounting courses. He is a frequent speaker at
conferences and universities on best teaching practices and has delivered over 20 professional
teaching workshops. His passion for helping students learn inspired him to create hundreds of short
videos teaching the fundamental concepts of accounting. This work led to the publication of the first
Courtesy of interactive video textbook for introductory accounting. Dr. Edmonds has received seven prestigious
Christopher Edmonds.
teaching awards including the UAB Faculty Student Success Award, UAB Transformative Online
Course Award, UAB Loudell Ellis Robinson Classroom Teaching Award, UAB Disability Support
Recognition Award, and the Virginia Tech Favorite Faculty Award. He has published four textbooks
and has written numerous articles that have appeared in publications, including The Accounting
Review, Journal of Accounting and Public Policy, Issues in Accounting Education, Advances in
Accounting Education, Advances in Accounting, and Review of Quantitative Finance and Accounting.
He currently serves on several editorial boards and the advisory board for the startup company, Edify.
Dr. Edmonds started his career as a web application developer creating software solutions to put
newspapers online. He began his academic training at Colorado State University. He obtained an
M.B.A. degree from UAB. His Ph.D. degree, with a major in accounting, was awarded by Virginia
Polytechnic Institute and State University. Check out his blog at www.accountingstepbystep.com.

Thomas P. Edmonds
Thomas P. Edmonds, Ph.D., is Professor Emeritus in the Department of Accounting at the University of
Alabama at Birmingham (UAB). He has been actively involved in teaching accounting principles
throughout his academic career. Dr. Edmonds has coordinated the accounting principles courses at
the University of Houston and UAB. He has taught introductory accounting in mass sections and in
distance learning programs. He has received five prestigious teaching awards, including the Alabama
Society of CPAs Outstanding Educator Award, the UAB President’s Excellence in Teaching Award, and
the distinguished Ellen Gregg Ingalls Award for excellence in classroom teaching. He has written
Courtesy of
numerous articles that have appeared in many publications, including Issues in Accounting, the
Thomas Edmonds. Journal of Accounting Education, Advances in Accounting Education, Accounting Education: A
Journal of Theory, Practice and Research, the Accounting Review, Advances in Accounting, the
Journal of Accountancy, Management Accounting, the Journal of Commercial Bank Lending, the
Banker’s Magazine, and the Journal of Accounting, Auditing, and Finance. Dr. Edmonds has served as
a member of the editorial board for Advances in Accounting: Teaching and Curriculum Innovations
and Issues in Accounting Education. He has published five textbooks, five practice problems (including
two computerized problems), and a variety of supplemental materials including study guides, work
papers, and solutions manuals. Dr. Edmonds’s writing is influenced by a wide range of business
experience. He is a successful entrepreneur. He has worked as a management accountant for
Refrigerated Transport, a trucking company. Dr. Edmonds also worked in the not-for-profit sector as a
commercial lending officer for the Federal Home Loan Bank. In addition, he has acted as a consultant
to major corporations, including First City Bank of Houston (now Citi Bank), AmSouth Bank in
Birmingham (now Regions Bank), Texaco, and Cortland Chemicals. Dr. Edmonds began his academic
training at Young Harris Community College in Young Harris, Georgia. He received a B.B.A. degree
with a major in finance from Georgia State University in Atlanta, Georgia. He obtained an M.B.A. degree
with a concentration in finance from St. Mary’s University in San Antonio, Texas. His Ph.D. degree with
a major in accounting was awarded by Georgia State University. Dr. Edmonds’s work experience and
academic training have enabled him to bring a unique user perspective to this textbook.

viii
Mark A. Edmonds
Mark A. Edmonds, Ph.D., CPA, is an Assistant Professor in the Department of Accounting and
Finance at the University of Alabama at Birmingham. He has taught principles and advanced
accounting classes in face-to-face, flipped, and online formats. Dr. Edmonds began his career
providing assurance services for the internationally recognized accounting firm Ernst & Young. At
the conclusion of his professional service, he obtained his Ph.D. from Southern Illinois University
Carbondale. He serves as the education adviser on the board of the Institute of Internal Auditors
Birmingham Chapter. Dr. Edmonds’s research focuses on alternative learning strategies and auditor
decision making. Courtesy of
Mark Edmonds.

Jennifer E. Edmonds
Jennifer Echols Edmonds, Ph.D., is an Associate Professor at the University of Alabama at
Birmingham (UAB) Collat School of Business. Her primary teaching areas are financial and
managerial accounting. She has experience teaching in the Undergraduate, MAC, and MBA
programs and currently serves as the course coordinator for the managerial accounting sequence
at UAB. She has received the UAB Loudell Ellis Robinson Classroom Teaching Award, as well as
teaching grants from Deloitte, UAB, and Virginia Tech. She created teaching resources for
incorporating International Financial Reporting Standards into Intermediate Accounting. The
Courtesy of
teaching resources were published online at the American Accounting Association. Dr. Edmonds is Jennifer Edmonds.
also active in the research community. She has published articles in prominent journals such as
Journal of Accounting and Public Policy, Advances in Accounting, Research in Accounting
Regulation, and The CPA Journal. Dr. Edmonds received a bachelor’s degree in accounting from
Birmingham-Southern College and completed her master’s and Ph.D. degrees in accounting at
Virginia Polytechnic Institute and State University.

Philip R. Olds
Professor Olds is Associate Professor of Accounting at Virginia Commonwealth University (VCU).
He serves as the coordinator of the introduction to accounting courses at VCU. Professor Olds
received his A.S. degree from Brunswick Junior College in Brunswick, Georgia (now Costal Georgia
College). He received a B.B.A. in accounting from Georgia Southern College (now Georgia
Southern University), and his M.P.A. and Ph.D. degrees are from Georgia State University. After
graduating from Georgia Southern, he worked as an auditor with the U.S. Department of Labor in
Atlanta, Georgia. A former CPA in Virginia, Professor Olds has published articles in various
professional journals and presented papers at national and regional conferences. He also served
Courtesy of Philip Olds.
as the faculty adviser to the VCU chapter of Beta Alpha Psi for five years. In 1989, he was recognized
with an Outstanding Faculty Vice-President Award by the national Beta Alpha Psi organization.
Professor Olds has received both the Distinguished Teaching Award and the Distinguished Service
Award from the VCU School of Business. Most recently, he received the university’s award for
maintaining High Ethical and Academic Standards While Advocating for Student-Athletes and Their
Quest Towards a Degree.

ix
 HOW DOES THE BOOK
companies called suppliers. The goods purchased for resale are called
merchandise inventory. Merchandising businesses include retail companies

(companies that sell goods to the final consumer) and wholesale companies
(companies that sell to other businesses). Sears, JCPenney, Target, and Sam’s

Club are real-world merchandising businesses.

● REAL-WORLD EXAMPLES
The Curious Accountant
Jason recently purchased a new Ford automo- The text provides a variety of real-world examples of financial accounting as
bile from a dealer near his home. When he
told his friend Ryan that he was able to pur- an essential part of the management process. There are descriptions of ac-
chase the car for $1,000 less than the sticker
price, Ryan told Jason he had gotten a lousy counting practices from real organizations such as Coca-Cola, Enron, General
deal. “Everybody knows there’s a huge
markup on cars,” Ryan said. “You could have Motors, and Amazon.com. These companies are highlighted in blue in the text.
gotten a much lower price if you’d shopped
©Jim West/Alamy Stock Photo
around.”
Jason responded, “If there’s such a big profit margin on cars, why did so many of the car manu- “Relating this material to real life is key to get the students interested
facturers get into financial trouble?” Ryan told him that he was confusing the maker of the car with
the dealer. Ryan argued that although the manufacturers may not have high profit margins, the and make it applicable regardless of the major. This does a great job.”
dealers do, and told him again that he had paid too much.
Exhibit 4.1 presents the income statements for AutoNation, Inc. and Ford Motor Company. Based
on these statements, do you think either of these guys is correct? For example, if you pay $20,000 —ROB STUSSIE,
for a vehicle from a dealership operated by AutoNation, the largest auto retailer in the United
States, how much did the car cost the company? Also, how much did the car cost the Ford Motor UNIVERSITY OF ARIZONA
©Jim West/Alamy Stock Photo
Company to manufacture? (Answers on page 204.)
204 Chapter 4

Answers to The Curious Accountant As data from the income state-

ment for AutoNation show, auto-
● THE CURIOUS ACCOUNTANT
mobile dealers do not have big markups on the cars they sell. The new vehicles the company sold for
$12,255.8 million in 2016 cost the company $11,620.0 to purchase, resulting in a gross margin of
$635.8, or 5.2 percent. In other words, if you bought an “average” car from AutoNation for $20,000,
Each chapter opens with a short vignette. These pose a
183 × .052), meaning it paid Ford $18,960
the company’s gross profit on it was only $1,040 ($20,000
($20,000 − $1,040). Furthermore, the company still had other expenses to pay besides its cost of
question about a real-world accounting issue related to
goods sold. In 2016, only 2.0 percent of each dollar of AutoNation’s sales was net profit ($430.5 ÷
$21,609.0). Remember, the amount shown for sales on AutoNation’s income statement is based on
the topic of the chapter. The answer to the question ap-
edm99449_ch04_182-235.indd 183 what customers actually paid for the cars the company sold,
1/9/18 not the “sticker price.”
8:43 PM pears in a separate sidebar a few pages further into the
Meanwhile, if Ford sold the car to AutoNation for $18,960, it earned a 10.5 percent gross margin on
the sale, or $1,991 [$14,962 ÷ $141,546 = 10.5%; ($141,546 − $126,584 = $14,962)] [$18,960 × .105 = chapter.
$1,991]. Like AutoNation, Ford still had other expenses to pay for besides the cost of goods sold. In
2016, Ford earned 3.0 percent of net profit on each dollar of sales ($4,596 ÷ $151,800).
Most consumers significantly overestimate the profit margins of the companies from which they
Accounting for Deferrals 147

● FOCUS ON INTERNATIONAL ISSUES

buy goods. Retailers, especially, operate with small profit margins, so inventory management, dis-
cussed in Chapter 5, is very important to their success.
FOCUS ON INTERNATIONAL ISSUES
HOW DOES IFRS DIFFER FROM U.S. GAAP?
Chapter 1 discussed the progression toward a single global GAAP
in the form of International Financial Reporting Standards (IFRS).
That discussion noted that the United States does not currently Real-World Data These boxed inserts expose students to IFRS and other international is-
allow domestic companies to use IFRS; they must follow GAAP. Exhibit 4.9 shows the gross margin percentages and return-on-sales ratios for 10 companies.
Let’s briefly consider just how U.S. GAAP differs from IFRS.
The differences can be summarized in a few broad cate-
sues in accounting.
Three of the companies are manufacturers that produce pharmaceutical products, and the
remaining 7 companies sell various products at the retail level. These data are for the compa-
gories. First, some differences are relatively minor. Consider nies’ 2016 fiscal years.
the case of bank overdrafts. Under IFRS, some bank overdrafts
are included as a cash inflow and are reported on the state-
ment of cash flows. U.S. GAAP does not permit this. Con-
versely, some differences relate to very significant issues. Both
IFRS and GAAP use historical cost as their primary method for
EXHIBIT 4.9
reporting information on financial statements, but both allow
Industry/Company Gross Margin % Return on Sales %
exceptions in some circumstances. However, IFRS permits

● THE FINANCIAL ANALYST

Accounting for Accruals 93
more exceptions to historical cost than GAAP does. Some of Pharmaceutical manufacturers Accounting for Deferrals 129
these differences will be discussed in later chapters. GlaxoSmithKline 66.7 3.8
LO 2-7
Some of the differences affect how financial statements The Financial Johnson &Analyst
Johnson 69.8 23.0
are presented in annual reports. IFRS requires companies to Merck & Co. 65.1 14.3 Identify the primary
Balance Sheet Retail pharmacies
report all financial statements for the current year and the prior Corporate governance is the set of relationships between the board of directors, management, components of
year—two years of comparative data. Rules of the Securities CVS
shareholders, auditors, and otherIncome
stakeholders Statement
that determine16.3 3.0
how a company is Statement
operated. of corporate governance.
andAssets
Exchange Commission = requireLiab. U.S. companies
two years of balance sheets (the current and prior year) and
+to report Stk. Clearly,EquityfinancialRite Aid are keenly interested in these relationships.
analysts
Walgreens
the key components of corporate governance.
Department stores
25.5
25.5
0.5
This section discusses
Cash 3.6Flows Financial statement analysis is highlighted in each chapter un-
three years of all other statements. See the financial state-
Supplies Ret. Earn. Rev. − Exp. = 39.4Net Inc.
ments of Target Corporation in Appendix B as an example. Of
course, companies can show additional years if they wish.
(650) = in the first +
NAcourse of accounting, CORPORATE
(650)
Macy’s
Walmart
NA GOVERNANCE
Office supplies − 650 =
24.9
(650)
2.4
2.8
NA
der this heading.
©Corbis/PunchStock
As you would expect
some of the differences between IFRS and GAAP are simply
Office Depot
Staples
24.6
26.2
4.8
1.8
too complex to be covered. Examples of such items relate to Importance of Ethics
business combinations
136 Chapter 3
(when one company buys another) and ©Corbis/Punchstock The accountant’s role in society requires trust and credibility. Accounting information is
foreign currency translations (when a company has subsidiar- worthless if the accountant is not trustworthy. Similarly, tax and consulting advice is useless
CHECK YOURSELF 3.1
ies that operate outside the United States). if itthe
comes from an incompetent
reference person. Theshown
high ethical
in thestandards required by the profes-

● CHECK YOURSELF
flows. The explanations are tied to superscripted numbers
Do not be overwhelmed byincome the differences
statement. between IFRS and GAAP. They“ahave
sion state manypublic
certified moreaccountant
rules alike assumes
than differ-
an obligation of self-discipline above and
ent. A person who has a reasonable understanding of U.S. GAAP should beyond be requirements
able to read financial
of laws and statements prepared
regulations.” The American Institute of Certified Public
Treadmore
under IFRS withoutCompany 1.started
Alvarado
too much difficulty. If you the
are Year
provided
interested4 accounting
$110,400
in moreof Accountants
consulting
detailed, period
services
up-to-date
(AICPA) with
but $580
collected
information
requires of supplies
only
about
its members $105,000
IFRS versus
to complyonwith
of cash.the Code of Professional Conduct.
hand.
GAAP, the During
large international In other
Year 4,accounting
the company firmswords,
paid
have Alvarado
cashthat
websites
edm99449_ch04_182-235.indd recognized
to can
204 purchase
Thehelp. $5,400
Two of
preface ($110,400
$2,200
examples
the Codeare:of−supplies.
$105,000) of
www.iasplus.com,
includes Aaccrued
physical
six Principles whichconsult- Conduct that are summarized
of Professional 1/9/18 8:43 PM
ing revenue
is presented by the firm of Deloitte Touche duringand
Tohmatsu, Yearwww.kpmg.com/global/en/topics/global-ifrs-institute/,
1. This is
in confirmed
Exhibit 2.7.byThetheimportance
balance in accounts
of ethical receivable
which that is
count of supplies indicated that there were
is presented by the firm of KPMG. shown on the Year 1 balance sheet.
$420 of supplies on hand at theconduct
end isofuniversally recognized across a broad
spectrum of accounting organizations. The Institute of Management Accountants requires its
Year 4. Treadmore pays
information alone, determine
cash for
consulting
supplies
2. Alvarado collected $18,000 of cash
theservices.
amount
at the time
of supplies
In other
they
also Alvarado
words, requires
expense
are
for installation
members purchased.
to follow aservices
itsdeferred
members
to thebe
Based
but provided
set of Standards
torecognition
subscribe
recognized
of Ethical
toofthe
on this
only $10,500
organization’s
These short question/answer features occur at the end of each main topic
Conduct.ofThe Institute of Internal Auditors
of instal- Code of Ethics.
on the
$7,500
income statement and the
lation revenue in Year 1. This is confirmed by the balance in the unearned revenue ac-
amount of cash flow to be shown in the operating activities
count shown on the Year 1 balance sheet. and ask students to stop and think about the material just covered. The
3.3section of theratio
percent. Neither statement
seems 3. ofbanks
good; cash
Alvarado flows. pay$36,000
recognized
sometimes EXHIBIT
of2.0
more than salary 2.7but paid its employees only $32,000
expense
percent interest

Answer
Aflac’s was 13.0The amount
percent and Aetna’s
cash. In otherratios,
on deposits in savings accounts. The return-on-equity
ofexpense.
supplies
was 12.7This
words,however,
expense
percent—much
Alvarado
is confirmed better
show
recognized
by the
accrued
thanbalance
$4,000
a different
what onbanksthe
in the
($36,000 − $32,000) of accrued salary
picture;
Principles of Professional Conduct: AICPA Code of Professional Conduct
payincome
salaries statement
payable account shown is the on the
answer follows to provide immediate feedback before students go on to a
depositors.
amount of supplies used Year 1 balance
during sheet.
the accounting period. This amount Principle is computed next:
new topic.
Responsibilities
Exhibit 3.10 shows that while ExxonMobil’s return-on-equity
4. Alvarado recognized $20,000 of otherratio is about two
In carrying times
out theirexpenses
operating responsibilities
but paidas professionals,
its suppliersmembers
only should exercise sensitive
higher than its return-on-assets ratio (4.5 percent
$18,200 cash. versus 2.4 percent).
In other Supplies
words, Alvarado By comparison,
professional
accruedand$1,800
moral judgments
($20,000 in−all$1,800)
their activities.
of accrued
$580 Beginning
Aflac’s return-on-equity ratio is balance + $2,200
over six times higher than purchases
its return-on-assets = $2,780 Supplies
other operating expenses. This is confirmed byratio
the balance
The Public Interest Principle in the accounts payable ac-
(13.0 percent versus 2.0 percent). How did this happen?
count shown on available
the Year 1 for
Compareuse their debt-to-assets
balanceMembers
sheet. should accept the obligation to act in a way that will serve the public interest,
ratios. Aflac financed 84 percent of its assets with debt compared to Exxon’s 47 public
honor the percent.trust, and demonstrate commitment to professionalism.
$2,780
Financial leverage is the biggest 5. Alvarado
factor Supplies
causing paidavailable
these $800 cash
results, but itfor
for
is supplies
notuse but$420
−
the only recognized
factor Ending
that only $650 of supplies expense in
affects this ratio. Year 1. In other words, Alvarado deferred Integrity$150 ($800 − $650) of supplies expense. This
Principle
supplies balance
is confirmed = $2,360
by the balance Supplies
in the To maintain
supplies used
and broaden
account shownpublic confidence,
on the members
Year 1 balance should perform all professional
sheet.
responsibilities with the highest sense of integrity.
The cash flow from operating activities is the amount
REALITY BYTES
the accounting
of cash
Objectivity
period. In this case, Treadmore paid $2,200
A member
paid for Principle
and Independence
cash
should to purchase
maintain
supplies during
objectivity andsupplies.
be free of conflicts of interest in discharging
professional responsibilities. A member in public practice should be independent in fact
This amount would be shown as a cash outflow. and appearance when providing auditing and other attestation services.
● REALITY BYTES Answers to The Curious Accountant
WHY DID THAT BIG EXPENSE CAUSE THE STOCK Due
edm99449_ch03_126-181.indd 147
PRICE TO RISE?
Care Principle 1/2/18 10:13 PM

This feature expands on the topics by showing how companies use the
A member should observe the profession’s technical and ethical standards, strive
If you follow business news, which you should if you are a business continually to improve competence and the quality of services, and discharge professional
major, you have probably heard about a company reporting a big responsibility to the best of the member’s ability.
write-off of assets, sometimes called a “special charge.” Such an Scope and Nature of Services Principle
ACCOUNTING FOR PREPAID ITEMS
announcement sends a signal to readers that the company’s earn- A member in public practice should observe the Principles of the Code of Professional
ings will decrease as a result of the write-off. However, in many Conduct in determining the scope and nature of services to be provided.
concepts discussed in the chapter to make real-world business decisions.
cases, this seemingly bad news does not cause the company’s
EVENT
stock price3 to fall;On
in fact,
Marchit sometimes
1, Year causes it to increase.
1, Alvarado Why?
pays $12,000 cash to lease office space for one LO 3-2
Consider the following January 20, 2017, announcement
year
from beginning immediately.
Ford Motor Company:
The Sarbanes–Oxley Act
Credible financial reporting relies on a system of checks and balances. Corporate
Showmanagement
how accounting
The Forcost
the of
yearthe
ended office
Decemberspace
31, described
2016, we expectintoEvent 3pre-
record a is an asset. Itforispreparing
is responsible recorded in the
financial asset
reports account
while outside, independent accountants (CPAs)
forand
prepaid items
tax remeasurement loss of approximately $3.0 billion related to audit the reports. The massive surprise bankruptcies of Enron in late 2001 WorldCom
Prepaid Rent. Alvarado expects to benefit from incurring
our pension plans and OPEB plans. . . . On an after-tax basis, the this cost by using the office to gener- affects financial
ate revenue
remeasurementoverlossthewillnext
reduce12ourmonths.
full-year netExpense recognition
income by about is deferred until Alvarado actually
©liorpt/123RF statements.
uses$2.0thebillion
officein 2016.
space to help generate revenue. Other commonly deferred expenses include pre-
paid Despite
insurancethis seemingly
and bad financial
prepaid taxes. news,
As Ford’s titles
these stock price
imply,wasdeferred
1.1 percentexpenses
higher one are
weekfrequently
after the announce-
called
ment, while General Motors’s stock price had not changed and Toyota Motor Corporation’s stock was 1.4 percent lower.
prepaid
©Paul There items.
Sakuma/AP
are at least a couple Images
of reasons why this seeming bad news may have very little impact on a company’s stock
price.Purchasing prepaid
First, while write-offs rent is an
do decrease asset they
earnings, exchange
often dotransaction. The asset account
edm99449_ch02_074-125.indd 93
not decrease the company’s Cash
cash flows, decreases
and cash flow is at 1/2/18 9:29 PM

x
least as important to investors as earnings. Ford’s special charge was mostly the result of it changing the way it accounted
and the asset account Prepaid Rent increases. The amount of total assets is not affected. Note
for pension expenses. The new method did not require any more or less cash payments than did the old method.
that The
thissecond
eventreason
does that
notwriting
affectoffthe income
assets statement.
can sometimes haveExpense
a positive recognition is deferred
effect on a company’s untilisthe
stock price be-
office space
cause extra is used.
expenses thatBecause the cash
are recognized todayoutflow
may meanwasthereincurred
will be fewer to expenses
purchaserecognized
prepaidinrent (a short-
the future; thus,
future earnings will be higher than they otherwise would have been. This subject will be explained further in later chap-
term asset) that will be used to operate the business, it is classified as an operating
ters, but keep in mind that investors are more interested in the future than they are in the past, so lower current earn-
activity on
the
ingsstatement of cash
that lead to higher flows.
future Theare
earnings effects on theasfinancial
often viewed good news. statements are shown next:
So, when you hear a company make a big announcement about its business, always ask yourself two questions:
How does this event affect cash flows? And, how will this event affect future earnings?
Balance Sheet
Income Statement
MOTIVATE STUDENTS?
● ANNUAL REPORTS
Excerpts from the 2016 annual report for Target Corporation are shown in APPENDIX B
Appendix B.
©baona/Getty Images

PORTION OF THE FORM 10-K FOR TARGET

Business Applications Cases related to the annual report are included CORPORATION
at the end of each chapter. This appendix contains a small portion of the Form 10-K for the Target Corporation that was
filed with the Securities and Exchange Commission on March 8, 2017. This material relates

A Capstone Financial Statement Analysis Project for the annual report

to the company’s fiscal year ended January 28, 2017. Throughout the text, this is referred to
as the company’s 2016 fiscal year. The material in this appendix is included for illustrative
purposes, and is meant for educational purposes only.

is located in Appendix E. Also, a general purpose annual report project is For the ATC-1 problem in each chapter, you will need the complete version of Target’s
Form 10-K, which can be found online at http://investors.target.com. Once on the “sec filings”
page, in the “filter by form type” drop-down window, select “Annual filings,” and then click the

included for instructors to assign for any company. 10-K form that has a filing date of 03/08/17. Several versions of this 10-K are available, but the
PDF format works best for the purposes of this text. The authors suggest you download and
save this file so you do not need to look it up each time you need it. The Form 10-K may also
be obtained from the SEC’s EDGAR website using the procedures explained in Appendix A.
UNITED STATES

“I like the way the book stresses real world applications and makes the SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

transactions and discussions meaningful and engaging.” (Mark One)

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934
For the fiscal year ended February 1, 2014
OR

—STACEY KLINE, TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 1-6049

DREXEL UNIVERSITY

TARGET CORPORATION
(Exact name of registrant as specified in its charter)

Minnesota 41-0215170
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Nicollet Mall, Minneapolis, Minnesota 55403
(Address of principal executive offices) (Zip Code)
Accounting for Merchandising Businesses 205
Registrant's telephone number, including area code: 612/304-6073

A review of the data confirms our earlier finding that ratios

Securities forPursuant
Registered companies
To Section 12(B)in Ofthe
The Act:

same industry are often more similar than are ratios for companies from different in-
dustries. For example, note that the manufacturers have much higher margins, both
for gross profit and for net earnings, than do the retailers. Manufacturers Title of Each Classare often Name of Each Exchange on Which Registered
Common Stock, par value $0.0833 per share New York Stock Exchange
able to charge higher prices than are retailers because they obtain patents that give
them a legal monopoly on the products they create. When a company such asSecurities Merck registered pursuant to Section 12(g) of the Act: None

develops a new drug, no one else can produce that drug until the patent expires,
giving it lots of control over its price at the wholesale level. Conversely,
Indicate by whenis Rite
check mark if the registrant Aidseasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
a well-known

sells Merck’s drug at the retail level, it faces price competition

Indicate by check from
mark if theCVS
registrantCaremark
is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No 689
(CVS), a company that is trying to sell the same drugNote to– Checking
the same consumers. One ©philipus/Shutterstock
the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their
obligations under those Sections.
way CVS can try to get customers to shop at its store isIndicate
to charge lower prices than its
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
competitors, but this reduces its profit margins because it must pay the same price toNo
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes
get Merck’s drug as did Rite Aid. As the data in Exhibit 4.9 show, in 2016 CVS had a lower
gross margin percentage than Rite Aid, indicating it is charging lower prices for similar goods.
However, CVS still managed to generate edm99449_appb_689-695.indd
a higher return on sales 689
percentage. 1/9/18 9:46 AM

It is difficult not to notice that GlaxoSmithKline had a much lower return on sales per-
centage than its direct competitors. This was the result of Glaxo having an unusually high in-
come tax expense in 2016.
In the examples presented in Exhibit 4.9, some companies with higher gross margin per-
centages have higher return-on-sales ratios than their competitors, but this is not always the
case. In addition to the CVS and Rite Aid comparison above, notice that Staples had a gross
margin percentage that was 6 percent lower than Office Depot’s [(26.2 − 24.6) ÷ 26.2], but

● A LOOK BACK/A LOOK

its return-on-sales ratio was much higher.

A Look Back
FORWARD Merchandising companies earn profits by selling inventory at prices that are higher than the
cost paid for the goods. Merchandising companies include retail companies (companies that
sell goods to the final consumer) and wholesale companies (companies that sell to other mer-
chandising companies). The products sold by merchandising companies are called inventory.
Students need a roadmap to make sense of where the The costs to purchase inventory, to receive it, and to ready it for sale are product costs, which
206first accumulated
are Chapter 4 in an inventory account (balance sheet asset account) and then recog-

chapter topics fit into the “whole” picture. A Look Back
reviews the chapter materials and a Look Forward intro-
duces students to what is to come.
nized as cost of goods sold (income statement expense account) in the period in which goods
statements (statements presented on a percentage basis) and ratio analysis are useful monitor-
are sold. Purchases and sales of inventory can be recorded continually as goods are bought
ing tools. Common size financial statements permit ready comparisons among different-size
and sold (perpetual system) or at the end of the accounting period (periodic system, dis-
companies. Although a $1 million increase in sales may be good for a small company and bad
cussed in the chapter Appendix).
for a large company, a 10 percent increase can apply to any size company. The two most com-
Accounting for inventory includes the treatment of cash discounts, transportation costs,
mon ratios used by merchandising companies are the gross margin percentage (gross margin ÷
returns and allowances, and shrinkage. The cost of inventory is the list price less any pur-
net sales) and the net income percentage (net income ÷ net sales). Interpreting these ratios
chase returns and allowances and purchase discounts, plus transportation-in costs. The cost
requires an understanding of industry characteristics. For example, a discount store such as
of freight paid to acquire inventory (transportation-in) is considered a product cost. The cost
Walmart would be expected to have a much lower gross margin percentage than an upscale
of freight paid to deliver inventory to customers (transportation-out) is a selling expense. Sales
store such as Neiman Marcus.
returns and allowances and sales discounts are subtracted from sales revenue to determine the
Managers should be aware of the financing cost of carrying inventory. By investing funds
amount of net sales reported on the income statement. Purchase returns and allowances re-
in inventory, a firm loses the opportunity to invest them in interest-bearing assets. The cost of
duce product cost. Theoretically, the cost of lost, damaged, or stolen inventory (shrinkage) is
financing inventory is an opportunity cost. To minimize financing costs, a company should
an operating expense. However, because these costs are usually immaterial in amount, they
minimize the amount of inventory it carries, the length of time it holds the inventory, and the
are typically included as part of cost of goods sold on the income statement.
time it requires to collect accounts receivable after the inventory is sold.
Some companies use a multistep income statement, which reports product costs separately
from selling and administrative costs. Cost of goods sold is subtracted from sales revenue to
determine gross margin. Selling and administrative expenses are subtracted from gross margin
to determine income from operations. Other companies report income using a single-step
A Look Forward
format, in which the cost of goods sold is listed along with selling and administrative items in
a single expense category that is subtracted in total from revenue to determine income from
operations.
Managers of merchandisingTobusinesses
this point, operate
the text has
in aexplained the basic accounting
highly competitive cycle for service and merchandising
environment.
businesses.
They must manage company operations Futuretochapters
carefully more closely
remain profitable. address
Common specific
size accounting issues. For example, in
financial
Chapter 5 you will learn how to deal with inventory items that are purchased at differing
prices. Other chapters will discuss a variety of specific practices widely used by real-world
companies.

edm99449_ch04_182-235.indd 205
APPENDIX 1/9/18 8:43 PM

LO 4-9 Periodic Inventory System

Under certain conditions, it is impractical to record inventory sales transactions as they
Identify the primary
features of the
occur. Consider the operations of a fast-food restaurant. To maintain perpetual inventory
periodic inventory records, the restaurant would have to transfer from the Inventory account to the Cost of
system. Goods Sold account the cost of each hamburger, order of fries, soft drink, or other food
items as they were sold. Obviously, recording the cost of each item at the point of sale
would be impractical without using highly sophisticated computer equipment (recording
the selling price the customer pays is captured by cash registers; the difficulty lies in cap-
turing inventory cost).
The periodic inventory system offers a practical solution for recording inventory transac-
tions in a low-technology, high-volume environment. Inventory costs are recorded in a Pur-
chases account at the time of purchase. Purchase returns and allowances and transportation-in
are recorded in separate accounts. No entries for the cost of merchandise purchases or sales
are recorded in the Inventory account during the period. The cost of
EXHIBIT 4.10 goods sold is determined at the end of the period, as shown in
Exhibit 4.10.
Schedule of Cost of Goods Sold for 2019 The perpetual and periodic inventory systems represent alterna-

xi
Beginning inventory $ 6,000 tive procedures for recording the same information. The amounts of
Purchases 11,000 cost of goods sold and ending inventory reported in the financial
Purchase returns and allowances (1,000) statements will be the same regardless of the method used.
Purchase discounts (200) The schedule of cost of goods sold, presented in Exhibit 4.10, is
Transportation-in 300 used for internal reporting purposes. It is normally not shown in
Cost of goods available for sale 16,100 published financial statements. The amount of cost of goods sold is
Ending inventory (4,100) reported as a single line item on the income statement. The income
Cost of goods sold $12,000 statement in Exhibit 4.4 will be the same whether JPS maintains
perpetual or periodic inventory records.
 Accounting for Merchandising Businesses 207

Advantages and Disadvantages of the Periodic System versus

HOW ARE CHAPTER CONCEPTS

the Perpetual System
The chief advantage of the periodic method is recording efficiency. Recording inventory
transactions occasionally (periodically) requires less effort than recording them continually
(perpetually). Historically, practical limitations offered businesses like fast-food restaurants
or grocery stores no alternative to using the periodic system. The sheer volume of transac-
tions made recording individual decreases to the Inventory account balance as each item was
sold impossible. Imagine the number of transactions a grocery store would have to record
every business day to maintain perpetual records.
Although the periodic system provides a recordkeeping advantage over the perpetual
system, perpetual inventory records provide significant control advantages over periodic re-
cords. With perpetual records, the book balance in the Inventory account should agree with
the amount of inventory in stock at any given time. By comparing that book balance with the
results of a physical inventory count, management can determine the amount of lost, dam-

Regardless of the instructional approach, there is

aged, destroyed, or stolen inventory. Perpetual records also permit more timely and accurate
reorder decisions and profitability assessments.
When a company uses the periodic inventory system, lost, damaged, or stolen merchan-
dise is automatically included in cost of goods sold. Because such goods are not included in

no shortcut to learning accounting. Students must

the year-end physical count, they are treated as sold regardless of the reason for their absence.
Because the periodic system does not separate the cost of lost, damaged, or stolen merchan-
dise from the cost of goods sold, the amount of any inventory shrinkage is unknown. This
feature is a major disadvantage of the periodic system. Without knowing the amount of inven-

tial benefits. practice to master basic accounting concepts. The

tory losses, management cannot weigh the costs of various security systems against the poten-

Advances in such technology as electronic bar code scanning and increased computing
power have eliminated most of the practical constraints that once prevented merchandisers

text includes a prodigious supply of practice

with high-volume, low dollar-value inventories from recording inventory transactions on a
continual basis. As a result, use of the perpetual inventory system has expanded rapidly in
recent years and continued growth can be expected. This text, therefore, concentrates on the
perpetual inventory system.

materials and exercises and problems.

Accounting for Receivables 353

Required

● SELF-STUDY REVIEW
a. Organize the transaction data in accounts under an accounting equation.
b. Prepare an income statement, a statement of changes in stockholders’ equity, a balance sheet, and
SELF-STUDY
a statement of cash flowsREVIEW
for Year 3. PROBLEM

A step-by-step
Exercise 7-16Aaudio-narrated series of slides
Accounts receivable
receivable
Academy Sales Company
is available
turnover in Connect.
and average days to collect accounts
(ASC) started the Year 2 accounting period with the balances given in the
LO 7-7
PROBLEM
horizontal financial statements model shown below. During Year 2, ASC experienced the following
The following information is available for Market, Inc. and Supply, Inc. at December 31:
business events:
1. PurchasedAccounts
$16,000 of merchandise inventory on account,
These example problems include a detailed,
Market,terms
Inc. 2/10, n/30.
Supply, Inc.
2. The goods that were purchased in Event 1 were delivered FOB shipping point. Freight costs of worked-out solution and provide support for stu-
$600 wereAccounts Receivable
paid in cash by the responsible party. $ 56,200 $ 75,400
Allowance for Doubtful Accounts
3. Returned $500 of goods purchased in Event 1.
Sales Revenue
2,248
606,960
2,256
867,100
dents before they work problems on their own.
4a. Recorded the cash discount on the goods purchased in Event 1.
4b. Paid the balance due on the account payable within the discount period. These review problems are included in an ani-
Required
5a. Recognized $21,000 of cash revenue from the sale of merchandise.
5b. Recognized
a. What $15,000 of
is the accounts cost of goods
receivable sold.for each of the companies?
turnover
mated audio presentation in the Connect Library.
The merchandise
6. What
b. in days
is the average Eventto5a was sold
collect to customers FOB destination. Freight costs of $950 were
the receivables?
paid in cash by the responsible party.
c. Assuming both companies use the percent of receivables allowance method, what is the estimated
Paid cash ofof$4,000
7. percentage for selling
uncollectible and administrative
accounts expenses.
for each company?
8. Sold the land for $5,600 cash.

PROBLEMS—SERIES A ● EXERCISE SERIES A & B

Problem 7-17A
All applicable Problems in Series A are available in Connect.

Accounting for uncollectible accounts: two cycles using the percent of LO 7-1
AND PROBLEM
edm99449_ch04_182-235.indd 207 revenue allowance method
The following transactions apply to Jova Company for Year 1, the first year of operation: CHECK FIGURES
c. Ending Accounts
1/9/18 8:43 PM

SERIES A & B
1. Issued $10,000 of common stock for cash.
2. Recognized $210,000 of service revenue earned on account.
Receivable, Year 1: $48,000
d. Net Income, Year 2: $113,400 There are two sets of problems and exercises:
3. Collected $162,000 from accounts receivable.
4. Paid operating expenses of $125,000. Series A and B. Instructors can assign one set for
5. Adjusted accounts to recognize uncollectible accounts expense. Jova uses the allowance method
of accounting for uncollectible accounts and estimates that uncollectible accounts expense will be homework and another set for classwork.
1 percent of sales on account.
The following transactions apply to Jova for Year 2:
1.
2.
Recognized $320,000 of service revenue on account.
Collected $335,000 from accounts receivable.
• Check Figures
3.
4.
Determined that $2,150 of the accounts receivable were uncollectible and wrote them off.
Collected $800 of an account that had previously been written off.
The figures provide key answers for selected
5. Paid $205,000 cash for operating expenses. problems.
6. Adjusted the accounts to recognize uncollectible accounts expense for Year 2. Jova estimates uncol-
lectible accounts expense will be 0.5 percent of sales on account.
Required
Complete the following requirements for Year 1 and Year 2. Complete all requirements for Year 1 prior
• Excel
to beginning the requirements for Year 2.
a. Identify the type of each transaction (asset source, asset use, asset exchange, or claims exchange). Many problems can be solved using the Excel™
b. Show the effect of each transaction on the elements of the financial statements, using a horizon-
tal statements model like the one shown here. Use + for increase, − for decrease, and NA for templates available in the Connect Library. A logo
not affected. Also, in the Statement of Cash Flows column, indicate whether the item is an
appears in the margins next to these problems.

edm99449_ch07_322-373.indd 353
“There is a rich variety of material of all levels of 1/9/18 9:43 PM

complexity. Between the wide variety of problems

and the algorithmic versions in Connect, I doubt
I would ever run out of homework problems.”
—EDWARD R. WALKER,
UNIVERSITY OF CENTRAL OKLAHOMA

xii
 n. What amount of net income would Oaks report on the income statement?

LO 3-6 Exercise 3-34B Using ratio analysis to assess return on equity

The following information was drawn from the Year 5 balance sheets of two companies:

Common Retained
Company Assets = Liabilities + Stock + Earnings

Steelman 720,000 = 400,000 + 200,000 + 120,000

Bingum 450,000 = 125,000 + 180,000 + 145,000

REINFORCED?
During Year 5, Steelman’s net income was $45,800, while Bingum’s net income was $22,300.
Required
a. Compute the debt-to-assets ratio to measure the level of financial risk of both companies.
b. Compare the two ratios computed in Requirement a to identify which company has the higher level
of financial risk.
c. Compute the return-on-equity ratio to measure the level of financial risk of both companies.
d. Compare the two ratios computed in Requirement a to identify which company is performing better.
e. Define the term financial leverage.
f. Identify the company that is using financial leverage to a greater extent.

● ANALYZE, THINK, ANALYZE, THINK, COMMUNICATE

COMMUNICATE (ATC)
ATC 3-1 Business Applications Case Understanding real-world annual reports
Required
Obtain the Target Corporation’s annual report at http://investors.target.com using the instructions in
Target Corporation
Appendix B, and use it to answer the following questions:
Each chapter includes an innovative section a. What was Target’s debt-to-assets ratio for its fiscal year ended January 28, 2017 (2016) and 2015?
­titled Analyze, Think, Communicate (ATC). This b. What was Target’s return-on-assets ratio for 2016 and 2015?
c. What was Target’s return-on-equity ratio for 2016 and 2015?
section offers Business Applications Cases, Group d. Why was Target’s return-on-equity ratio higher than its return-on-assets ratio for 2016 and 2015?

Assignments, Real-World Cases, Writing Assign- ATC 3-2 Group Assignment Missing information
On January 1, Year 1, three companies purchased the same make and model copy machine. However,
ments, Ethical Dilemmas, Research Assignments, each company made different assumptions regarding the useful life and salvage value of its particular
asset.
and Spreadsheet Assignments.
Company A Company B Company C
We use icons to help students identify the Cost of copy machine $45,000 $45,000 $45,000
type of question being asked. Salvage value
Useful life
5,000
5 years
5,000
4 years
10,000
4 years

Required
a. Divide the class into groups of four or five students. Organize the groups into two sections. Assign
one section of groups the copy machine data for Company A and Company B. Assign the other

•W
 riting • Internet “The strong Analyze, Think, Communicate group the copy machine data for Company B and Company C.

assignments assignments section promotes judgment, decision

making, and critical thinking.”
•G
 roup •R
 eal company —ANGELA WOODLAND
edm99449_ch03_126-181.indd 178 1/2/18 10:13 PM

exercises examples MONTANA STATE UNIVERSITY

“The number and coverage of the end of

• Ethics cases chapter material is one of the strong
selling points of the text.”
©McGraw-Hill Education —WENDY POTRATZ
UNIVERSITY OF WISCONSIN—OSHKOSH

xiii
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SUPPLEMENTS FOR INSTRUCTORS
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xxi
 BRIEF CONTENTS
©baona/Getty Images

Chapter 1 An Introduction to Accounting 2

Chapter 2 Accounting for Accruals 74

Chapter 3 Accounting for Deferrals 126

Chapter 4 Accounting for Merchandising Businesses 182

Chapter 5 Accounting for Inventories 236

Chapter 6 Internal Control and Accounting for Cash 278

Chapter 7 Accounting for Receivables 322

Chapter 8 Accounting for Long-Term Operational Assets 374

Chapter 9 Accounting for Current Liabilities and Payroll 428

Chapter 10 Accounting for Long-Term Debt 478

Chapter 11 Proprietorships, Partnerships, and Corporations 530

Chapter 12 Statement of Cash Flows 576

Chapter 13 The Double-Entry Accounting System 628

Chapter 14 Financial Statement Analysis (Available online

in Connect) 14-0

Appendix A Accessing the EDGAR Database through

the Internet 688
Appendix B Portion of the Form 10-K for Target
Corporation 689
Appendix C Summary of Financial Ratios 696
Appendix D General Ledger Capstone Project 699
Appendix E Capstone Financial Statement Analysis and
Annual Report Projects 710
Appendix F Accounting for Investment Securities 717
Appendix G Time Value of Money 726
Glossary 734
Index 743

xxiii
 CONTENTS
©baona/Getty Images

Note from the Authors iv

Chapter 1 An Introduction to Accounting 2

SECTION 1: Collecting and Statement of Changes in
Organizing Information 3 Stockholders’ Equity 24
Role of Accounting in Society 4 Preparing a Statement
Using Free Markets to Set Resource of Cash Flows 25
Priorities 4 Financial Statement
©McGraw-Hill Education/ Accounting Provides Information 5 Articulation 28
Jill Braaten, photographer
Types of Accounting Information 6 Business Liquidations 30
Nonbusiness Resource Usage 6 Business Liquidations Resulting from
Careers in Accounting 6 Net Losses 30
Measurement Rules 7 Business Liquidations Resulting
Reporting Entities 8 from the Mismanagement of
Assets 31
Elements of Financial
Statements 10 The Financial Analyst 32
Using Accounts to Gather Reporting Order 32
Information 10 Real-World Financial Reports 32
Creating an Accounting Annual Report for Target
Equation 11 Corporation 34
Types of Transactions 13 Special Terms in Real-World
Reports 35
Recording Business Events under
A Look Back 36
the Accounting Equation 13
Asset Source Transactions 14 A Look Forward 36
Asset Exchange Transactions 14 Self-Study Review Problem 36
Another Asset Source Transaction 15 Key Terms 39
Asset Use Transactions 15 Questions 40
Summary of Transactions 16 Section 1 Exercises–Series A 40
Preparing a Balance Sheet 17 Section 2 Exercises–
Second Accounting Cycle 18 Series A 46
Interpreting Information Shown in a Sections 1 and 2 Problems–
Balance Sheet 20
Series A 50
Two Views of the Liabilities and
Stockholders’ Equity Sections of the Section 1 Exercises–
Balance Sheet 20 Series B 55
SECTION 2: Reporting Section 2 Exercises–
Information 22 Series B 60
Preparing an Income Sections 1 and 2 Problems–
Statement 23 Series B 65
Income Statement and the Matching Analyze, Think,
Concept 23 Communicate 69
xxiv
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1059.
Hegemonius, Acta, c. VIII. pp. 11, 12, Beeson, mentions
Omophorus, but not Splenditenens. Splenditenens is,
however, well known to St Augustine, who describes him
(contra Faustum, Bk XV. c. 7) as Splenditenentem magnum,
sex vultus et ora ferentem, micantemque lumine, “Great
Splenditenens, bearing six faces and mouths, and glittering
with light.” So later (op. cit. Bk XX. c. 9) he says,
Splenditenentem, reliquias eorumdem membrorum Dei vestri
in manu habentem, et cetera omnia capta, oppressa,
inquinata plangentem, et Atlantem maximum subter humeris
suis cum eo ferentem, ne totum ille fatigatus abjiciat.
“Splenditenens, who has in his hand the remains of these
members of your God [i.e. the five elements or ‘sons’ of the
First Man] and who mourns the capture and oppression and
defilement of all the rest; and huge Atlas, who bears
everything with him on his shoulders, lest he should be
wearied and cast it away.” Bar Khôni (Pognon, pp. 188, 189)
describes them both, and calls Splenditenens “the Ornament
of Splendour,” while he makes the pair two of the five sons of
the Living Spirit, as more clearly appears in the Tunhuang
treatise (Chavannes et Pelliot, op. cit. p. 549, and notes 2 and
5). Where Manes found the figure of Splenditenens is not
apparent, but the world-bearing angel is an old conception in
Western Asia, as M. Cumont has shown in his before-quoted
Cosmogonie Manichéenne, App. II. He appears prominently
on the Mithraic monuments and was no doubt the original of
the Greek Atlas.

1060.
Alexander of Lycopolis, op. cit. c. III., says plainly that the Sun
and Moon were formed out of that part of the light (here called
δύναμις “power”), which, although it had been captured by the
powers of matter, had not been contaminated, while that
which had suffered some slight and moderate stain became
the stars and sky. The Acta (Hegemonius, op. cit. c. VIII. p. 11,
Beeson), as we have seen, says that the Living Spirit created
 the lights (φωστῆρες, luminaria), which are the remnants of
the soul (i.e. the armour of the First Man) and caused the
firmament to surround them. The author here evidently refers
to the Sun and Moon only.

1061.
The whole of this story, which is the reverse of edifying, is
studied by M. Cumont, with the fullest references to the
authorities, in his Cosmogonie Manichéenne before quoted, to
which it forms Appendix I, under the heading “La Séduction
des Archontes.” To this I must refer the reader, only remarking
that, while I fully agree that the goddess in question is
probably derived from the Mother of the Gods who under the
name (inter alia) of Atargatis was worshipped throughout Asia
Minor, I do not see that she had any connection with the
“Virgin of Light” of the Pistis Sophia. This Virgin of Light did,
indeed, pass into Manichaeism, but she had there a very
different name and attributes from the Mother of the Gods.
See p. 323, n. 4 infra.

1062.
En Nadîm in Kessler, op. cit. p. 393; Flügel, op. cit. pp. 90, 91.

1063.
Kessler, op. et pag. cit. n. 1, says it has dropped out of the
text, which seems likely.

1064.
Hegemonius, Acta, c. XII. pp. 19, 20, Beeson. The story is
given verbatim later, p. 306 infra.

1065.
The Mandaeans or Disciples of St John described on p. 305
seem a likely source, as they have many traditions about the
protoplasts, some of which clearly go back to before the
Christian Era. None of those mentioned by Brandt, Die
Mandäische Religion, Leipzig, 1889, pp. 34-39, however,
seem to be exactly similar to the story in the text.
1066.
This Mother of Life is one of the most prominent, though not
one of the most active figures in the Manichaean pantheon.
Her identification with the Spirit of the Right Hand or first
Power created by the Supreme God of Light has been
mentioned above (note 1, p. 293 supra). She doubtless has
her immediate origin in the great mother goddess worshipped
throughout Western Asia, whose most familiar name is
Cybele, but whom we have seen (Chap. II supra) identified
with Isis, Demeter, and all the goddesses of the Hellenistic
pantheon. See as to this, Bousset, Hauptprobleme, pp. 58
sqq., although he, too, falls into the error of identifying with
her the Virgin of Light of the Pistis Sophia. That the name
“Mother of Life” at least passed to all these goddesses is
certain; but it also found its way into Egyptian Christianity; for
in the Coptic spell or amulet known as the Prayer of the Virgin
in Bartos (i.e. Parthia), studied by Mr W. E. Crum (P.S.B.A.
vol. XIX. 1897, p. 216), the Virgin Mary is represented as
saying “I am Mariham (Μαριάμ), I am Maria, I am the Mother
of the Life of the whole World!”, and the popularity of the
“Prayer” is shown by its frequent appearance in Ethiopic and
Arabic versions (op. cit. p. 211). So, too, in the evidently
Christian Trattato Gnostico of F. Rossi (Memorie della Reale
Accademia di Torino, ser. II. t. xliii. p. 16) the magician says “I
entreat thee, O God, by the great revered Virgin (παρθένος) in
whom the Father was concealed from the beginning before
He had created anything.” Bar Khôni, again (Pognon, pp. 209-
211), speaks of the Kukeans, who seem to have been a semi-
Christian sect, and who taught that the coming of Jesus to
earth had for its object the redemption of His bride, the Mother
of Life, who was detained here below, like the Helena of
Simon Magus. Mother of Life is mentioned in all the
Mahommedan and Christian writers who have treated of
Manichaeism (for the references, see Chavannes et Pelliot,
op. cit. 1ère partie, p. 511, n. 1), in the Pahlavi MS. discovered
by the Germans at Turfan (F. W. K. Muller, Handschriften-
Reste in Estrangelo-Schrift, pp. 47, 55), and in the Chinese
treatise from Tun-huang (Chavannes et Pelliot, op. cit. p. 511
et al.). In this last, she is called Chan-mou, which is translated
“the Excellent Mother,” and En Nadîm in one passage
(Kessler, op. cit. p. 399; Flügel, op. cit. p. 100) calls her
Nahnaha, which Flügel would translate “The Aversion of the
Evil Ones.” It should be noticed, however, that her part in the
cosmogony is small, and that she acts upon the world, like all
these supercelestial powers, only through her descendants or
“sons.” These are treated of later (see p. 323 and n. 1, p. 302
infra). Titus of Bostra as quoted by Flügel, op. cit. p. 210,
speaks of her as δύναμις τοῦ ἀγαθοῦ οὐκέτι φῶς αἰσθητὸν
ἀλλ’ ὡς ἂν φαίη προβολὴ τοῦ θεοῦ. “[The] Power of the Good
One, no longer a perceptible light, but as if one should say, an
emanation of God.” Some years ago, we could hardly have
looked for her prototype or first appearance in the history of
religions in any other direction than Babylonia, where the
worship of Ishtar, her Babylonian counterpart, goes back as
far as we can trace Babylonian religion. Now, however, it is
plain that other races than the Babylonians may have been
concerned in the spread of the worship of the Great Mother
throughout Western Asia. In the Zoroastrian faith, she seems
to appear as Spenta Armaiti, the one certainly female power
among the seven Amshaspands, who in the Pahlavi texts is
set over the earth, as Vohu Mano is made protector of the
beasts, Asha Vahishta of the fire, and Khshathra Vairya is set
over metals. But besides this, she is identified in the Gâthâs
with the Wisdom of God (for references see pp. 136-137 of M.
Carnoy’s article in the Muséon mentioned below), an
identification which Plutarch (de Is. et Os. c. XLVII.) admits by
translating her name as σοφία, and like the Sophia of the
Gnostics is given as a spouse to her creator Ahura Mazda, to
whom she bears the First Man Gayômort (Darmesteter, Le
Zend-Avesta, t. I. pp. 128-129). Yet we now know that this
figure may have come into the Zoroastrian pantheon neither
from Semitic sources nor, as Darmesteter thought, from Plato.
M. A. Carnoy in a study called Armaiti-Ârmatay (Muséon, n.s.
vol. XIII. (1912), pp. 127-146) shows the identity of the Persian
 Amshaspand with the Vedic goddess Aramati. We have
already seen that the Vedic gods Varuna and Mitra were
worshipped by Hittites in Asia Minor before the XIIth century
B.C., and Prof. Garstang believes that the Earth-Mother was
the great goddess of the Hittites, and was the one worshipped
in Roman times at Hierapolis or Mabug as the Dea Syria or
Atargatis, a name that he equates with Derceto, the mother of
Semiramis in classic legend, and declares to be compounded
of Ishtar or Astarte and the Aramaic “Athar or Athe.” See
Strong and Garstang, The Syrian Goddess, pp. 1-8, and
notes 24, 25, and 30, on pp. 52, 53 and 30 op. cit. Zoroaster
and Manes may therefore have taken their mother goddess
from an Aryan rather than from a Semitic original.

1067.
This Living Spirit is the most active agent of the Light in the
Manichaean system, and seems to have held his place
unaltered through all the changes of Manichaean teaching.
Alexander of Lycopolis (contra Manich. c. III.) speaks of him as
the Δημιουργός or Architect of the Universe. The earliest part
of the Acta (Hegemonius, c. VII. p. 10, Beeson) says that he
was put forth from the Father (or Supreme God of Light) in
consequence of the prayers of the First Man after his defeat,
that he delivered this last, crucified or bound the Archons in
the firmament (as Jeû is said to have done in the Pistis
Sophia), made the Sun and Moon and appointed their
courses, and further made the eight earths. St Augustine,
contra Faustum, Bk XX. c. 1, makes the Manichaean Faustus
call him the “Third Majesty whom we acknowledge to have his
seat and his lodging-place in the whole circle of the
atmosphere. From whose powers and spiritual inpouring also,
the earth conceived and brought forth the suffering Jesus who
is the life and salvation of men and is hanging on every tree.”
St Augustine further speaks (op. cit. Bk XX. c. 9) of “your
mighty (potentem for viventem) Spirit, who constructs the
world from the captive bodies of the race of darkness or rather
from the members of your God held in subjection and
bondage.” St Augustine (see contra Faustum, Bk XV. c. 6) also
knows that the Living Spirit has, like the First Man, five sons,
to whom we shall return later. The Mahommedan writers have
much less to say on the subject. En Nadîm (Kessler, op. cit. p.
390; Flügel, op. cit. p. 88) says abruptly that “Joy [i.e. the
Mother of Life] and the Spirit of Life went to the frontier,
looked into the abyss of hell and saw there the First Man and
his angels,” whereupon the Spirit of Life called the First Man
with a voice of thunder and the latter “became a god.” This
story is so without connection with the context that Kessler is
probably right in attributing it to another source from that from
which the Fihrist has drawn up to this point. The source in
question was probably a late one; for Bar Khôni (op. cit. pp.
186-188) supplies many more details which will be given in
the text. Bar Khôni also amplifies the story in the Fihrist into a
description of how the Living Spirit, on seeing the First Man in
the Darkness, spoke “a word which took the appearance of a
pointed sword” (cf. Revelation i. 16), and how this word
caused to appear the image of the First Man. A dialogue then
ensues between apparently the sword and the image, which
appear to be here identified with the Appellant and
Respondent of later Manichaeism, and the pair are drawn up
out of hell. See Cumont, Cosmog. Manich. p. 24, and note 5.
Al Bîrûnî, Chronology, p. 190, also knows of the Spirit of Life
and says that Manes “preached” of him. In the Turfan texts
there is occasional mention of the “Spirit” together with the
Father and the Son (Müller, Handschriften-Reste, pp. 26, 28),
and also of the “commands” of the Holy Spirit to the Hearers,
which are plainly allusions to the Living Spirit or Ζῶν Πνεῦμα
of the Christian Fathers. In the Tun-huang treatise
(Chavannes et Pelliot, op. cit. pp. 510, 556) he is repeatedly
mentioned, and although nothing is said of his demiurgic or
world-creating powers, the part which he and the Mother of
Life play in the rescue of the First Man after his defeat is
recognized, and he is spoken of as forming the third person of
a Trinity of which the two other members are the Father or
highest God of Light and the “Son of the Light.” Finally (op. cit.
 p. 557), he is said to be “a white dove,” whereby his likeness
to the Holy Spirit of the Christian Trinity already noted by
Faustus is emphasized (see Augustine, ubi cit. supra and Bk
XX. c. 6).

1068.
This conception of Jesus as a warrior has already been seen
in the Pistis Sophia, see p. 156 supra. So we read of “Jesus
the victorious” in the Tun-huang treatise, p. 566, n. 3.

1069.
En Nadîm in Kessler, op. cit. pp. 393 sqq.; Flügel, op. cit. pp.
90 sqq. Theodore bar Khôni (Pognon, op. cit. pp. 189 sqq.),
gives a much more elaborate account of the creation of man
and the other animals, for which and for its explanation the
reader must be referred to the elaborate analysis of M.
Cumont (Cosmog. Manich. pp. 34-49, and App. II., “La
Séduction des Archontes”). It should be noted, however, that
some part of this story was known to St Augustine. See
especially contra Faustum, Bk VI. c. 8.

1070.
So Rochat, op. cit. pp. 157, 158.

1071.
Kessler, op. cit. pp. 72, 80; Brandt, Mandäische Religion, p.
178.

1072.
Rochat, op. cit. pp. 156-178, has carefully examined the
resemblances between the system of Manes and that of the
Mandaites and declares that it is at present impossible to say
which of them has borrowed from the other.

1073.
Hegemonius, Acta, c. XII., pp. 19, 20, Beeson.
1074.
Op. cit. c. VIII., p. 12, Beeson.

1075.
Chavannes et Pelliot (op. cit. p. 517, n. 3) make this the work
of the Living Spirit, but they are clearly wrong. The text of the
Acta referred to in the last note leaves no doubt that it is that
of the “Son.”

1076.
Hegemonius, Acta, c. XI., p. 18, Beeson.

1077.
This is the tradition evidently known to the author of the
Μέρος τευχῶν Σωτῆρος when he makes Jesus say “When I
spoke with Enoch out of the Tree of Knowledge in the
Paradise of Adam.” (See Chap. X, p. 173 supra.)

1078.
Al Bîrûnî, Chronology, p. 190.

1079.
Hegemonius, Acta, c. IX., p. 14, Beeson. This idea of the
macrocosm and microcosm according to which the body of
man is a replica of the universe is found in nearly all later
mysticism—also in the Cabala and in the later Zoroastrian
treatises. In the Tun-huang treatise it forms the chief theme of
the homiletic part of the work.

1080.
Op. cit. c. VIII., pp. 12, 13, Beeson. The Latin version has vir
“man” for aer “air” in its description of the Column of Glory.
Probably a clerical error.

1081.
Op. cit. c. X., pp. 15, 16, Beeson. The word used is κέλεφος;
but the Latin texts all read “elephant.”
1082.
Ἐρῶ ... πῶς μεταγγίζεται ἡ ψυχὴ εἰς πέντε σώματα, op. et
cap. cit. p. 15, Beeson.

1083.
The soul of the rich man is in the same chapter said to pass
into the body of a beggar and thereafter εἰς κόλασιν αἰώνιον
“to everlasting punishment.” Is it from this source that the
Calvinists took their doctrine of eternal damnation? The
reprobation of the rich as such and without regard to the use
they might make of their wealth perhaps accounts for the
levelling and republican politics of the mediaeval sectaries.

1084.
The Bowl of water reminds one of the cup of soberness and
reflection administered to just souls by the little Sabaoth the
Good in the Μέρος τευχῶν Σωτῆρος. See Chap. X, p. 187
supra. The garment was probably the “heavenly nature” with
which the soul had to be clothed before it could ascend to the
upper spheres of light (cf. the Pistis Sophia). That the crown
was designed as a protection against the spirits of evil, there
are many indications in the last-mentioned document.

1085.
Kessler would here read “gods” for “goddess.”

1086.
That is to say, the particular world of light, whether
Gentleness, Knowledge, Intelligence, Discretion, or
Discernment, from which the soul descended. As the “armour”
of the First Man, from which the souls of men are formed, was
made with the aid of these five worlds, it is reasonable to
suppose that one or other predominates in the soul of
everyone. Hence probably the degree in the Manichaean
hierarchy to which any hearer might attain was thought to be
decided for him before his birth, and governed his destination
after death. Thus it is said in the Pistis Sophia: “Those who
have received exalted mysteries shall be in exalted places,
 and those who have received humble mysteries in humble
places in the light of my kingdom.” Cf. Chavannes et Pelliot,
op. cit. 1ère partie, p. 533, n. 1 and St Augustine as there
quoted.

1087.
The words given in the text are almost verbatim from En
Nadîm. See Kessler, op. cit. pp. 398-399; Flügel, op. cit. p.
100.

1088.
One of the 21 Nasks of the Sassanian Avesta.

1089.
Söderblom, op. cit. p. 83.

1090.
Op. cit. pp. 89 sqq.

1091.
See the Orphic belief about the uninitiated being plunged in
mud, Vol. I. chap. IV. p. 131 supra.

1092.
Kessler, op. cit. pp. 399-400; Flügel, pp. 100-101.

1093.
This is, I think, the only construction to be put on the words of
the Acta: τῆς δὲ ψυχῆς ἐστι τὰ ὀνόματα ταῦτα, νοῦς, ἔννοια,
φρόνησις, ἐνθύμησις, λογισμός. Hegemonius, Acta, c. X., p.
15, Beeson. For the Mahommedan tradition, see En Nadîm in
Flügel, op. cit. p. 95. The whole question of the organization
of the Manichaean Church is elaborately discussed by Flügel
in n. 225 on this passage, op. cit. pp. 293-299.

1094.
Kessler, op. cit. p. 398; Flügel, op. cit. pp. 94, 95.
1095.
This is perhaps the first instance in antiquity of the Gospel of
Work. That these virtues of the believer are made five in
number, so as to accord with the five worlds of light, needs no
demonstration.

1096.
See passages from Kessler and Flügel quoted in n. 1, p. 313
supra.

1097.
Rainerio Saccone, a Manichaean Perfect in Languedoc, who
afterwards turned Inquisitor, said that he had often heard the
Elect lamenting that they had not taken the opportunity of
committing more sins before receiving the “Baptism of the
Spirit” which was thought to wash them away. See H. C. Lea,
History of the Inquisition, vol. I., p. 94.

1098.
Flügel, op. cit. pp. 95-97. See, however, n. 4, p. 349 infra.

1099.
Josephus, Antiquities, Bk XX. cc. 2-4, breaks off his history at
the critical point. The Book of Esther is, perhaps, sufficient
proof of the capacity of the Oriental Jews for provoking
periodical pogroms at least as freely as their co-religionists in
modern Russia. Johnson (Oriental Religions), Persia, 1885, p.
410, quotes, apparently from Firdûsi, that the “old Persian
nobles” were driven by Ardeshîr’s reforms into Seistan, where
they were the ancestors of the present Afghan clans. As some
of these clans call themselves the Beni Israel, it is possible
that the Jews rather than the nobles were expelled on this
occasion, as happened before under Cyrus.

1100. Hegemonius, Acta, c. XII. pp. 20-21, Beeson; Ephraem Syrus

in Kessler, op. cit. p. 302. For Mahommedan confirmation, see
Schahrastâni in op. cit. p. 339.
1101. Al Bîrûnî, Chronology, p. 190.

1102. See Le Coq’s Short Account in J.R.A.S. 1909, pp. 299-322.

Another and more popularly written one by the same author
appeared in the Conférences au Musée Guimet, Paris, 1910
(Bibl. de Vulgarisation, t. XXXV.).

1103. The Marcionites, another much hated sect, also used a secret
script.

1104. St Augustine, contra Faustum, Bk V. c. 1.

1105. Hegemonius, Acta, c. V., pp. 5, 6.

1106. Augustine, contra Faust. Bk VII. c. 1.

1107. Op. cit. Bk XXIII. c. 2; ibid. Bk XXXII. c. 7.

1108. Op. cit. Bk XXVI. cc. 6, 8; ibid. Bk XXIX. c. 1.

1109. Op. cit. Bk XX. c. 2.

1110. Cumont, Cosmog. Manich. p. 15, points out that the

Manichaeans had already figured to themselves their King of
the Paradise of Light as existing in the three Persons of
Father, Mother, and Son in the shape of the Light, the Mother
of Life and the First Man. This Trinity corresponds in every
particular with that worshipped in Asia Minor under the names
of Zeus (or Hadad), Cybele, and Atys, at Eleusis as Dionysos,
Demeter, and Iacchos, in Greek Egypt as Osiris, Isis, and
Horus, and in Persia, according to M. Cumont, as Ormuzd,
Spenta Armaiti, and Gayômort. Cf. Bousset, Hauptprobleme,
pp. 333-337. That its origin can be traced, as the last-named
author seems to think, to the Babylonian Triad, Ea, Damkina,
and Marduk, is more doubtful. The Manichaeans really
acknowledged, as they were never tired of affirming, only two
gods, Light and Darkness, and considered all the lesser
powers of Light, including man’s soul, as formed from God’s
 “substance.” When, therefore, they spoke of trinities, tetrads,
and so on, it was in all probability for the purpose of producing
that show of outward conformity with other religions which
was one of the most marked features of their system.

1111. This is a reversal of the position in the Pistis Sophia, where

the female power or Virgin of Light is placed in the Sun and
the male Iao in the Moon.

1112. Compare the statement of Herodotus (Bk I. c. 131) that Zeus

(or Ormuzd) in the opinion of the ancient Persians was the
name of “the whole circle of air.”

1113. Augustine, contra Faust. Bk XX. c. 2.

1114. This is to be found in Harduin’s Acta Consilii. The quotation in

the text is taken from Matter, Hist. de Gnost. t. III. p. 89, and
Neander, Ch. Hist. II. p. 187.

1115. Pognon, op. cit. p. 5; Assemani, Bibl. Orient. t. III. p. 198 cit.

1116. Cumont, Cosmog. Manich. p. 106. It seems probable that the

Kashgar in question is the country in Chinese Turkestan still
called by that name. M. Pelliot, however, will have none of this
and insists that Bar Khôni’s Kashgar was Al Wasit near
Bagdad. For the controversy, see J.R.A.S. 1913, pp. 434 sqq.,
696 sqq. and 1914, pp. 421-427.

1117. Cumont, Cosmog. Manich. p. 1, n. 2, and authorities there

quoted.

1118. Ἀναθεματίζω πάντας οὓς ὁ Μάνης ἀνέπλασε θεοὺς, ἤτοι τὸν

τετραπρόσωπον Πατέρα τοῦ Μεγέθους καὶ τὸν λεγόμενον
Πρῶτον Ἄνθρωπον ... καὶ τὸν ὀνομαζόμενον Παρθένον τοῦ
φωτὸς κ.τ.λ. “I anathematize all those whom Manes lyingly
makes gods, to wit, the Father of Greatness in four Persons,
and the so-called First Man ... and the famous Virgin of Light,”
etc., Kessler, op. cit. p. 403. His quotation of the Formula is
 from the works of the Apostolic Fathers edited by Cotelerius in
1724 (Amsterdam). It seems to have been administered to
converts from Manichaeism to Catholicism down to a very late
date. See Beausobre, Hist. du Manichéisme, t. I. pp. 66-67.

1119. Pognon, op. cit. p. 184. Cumont, Cosmog. Manich. pp. 9, 10,
would substitute Reason for Knowledge and Will for Feeling.
The Greek names as given in the Acta (Hegemonius, op. cit.
c. X. p. 15, Beeson) are νοῦς, ἔννοια, φρόνησις, ἐνθύμησις,
λογισμός which the Latin translator makes into mens, sensus,
prudentia, intellectus, cogitatio. The first of these may pass as
correct, since Nous appears as the first emanation of the
Highest God in all the systems which preceded that of Manes
and from which he is likely to have copied. Of the rest, it can
only be said that they are the translations by scribes of Syriac
or Mandaite words which were ill calculated to express
metaphysical abstractions, and that their copyists were
seldom well acquainted with the etymology of any of the three
languages. Hence they generally made use of what they
thought were the corresponding expressions in the works of
great heresiologists like Irenaeus and Hippolytus without
troubling themselves much as to their appropriateness. In the
passage from the Acta above quoted, the five qualities named
are said to be the “names of the soul,” which is explained by
what is said later (op. cit. c. X. p. 17, Beeson) that “the air
(ἀήρ) is the soul of men and beasts and birds and fish and
creeping things.” En Nadîm (Kessler, op. cit. p. 387; Flügel, p.
86), as has been said on p. 291 supra, gives the “members of
the air” as Gentleness, Knowledge, Intelligence, Discretion
and Discernment, which are the same as those which he has
just attributed to the King of the Paradise of Light. St
Augustine (c. Faust. Bk XX. c. 15) says in like manner that the
Manichaeans thought their souls “members of God,” which
seems to refer to the same belief. Bar Khôni (Pognon, op. cit.
p. 186), as has been said, not only assigns the five dwellings
of Intelligence, Knowledge, Thought, Reflexion and Feeling to
the Living Spirit, but makes him draw his five sons from them,
 and M. Cumont (Cosmog. Manich. p. 10, n. 3) quotes the Acta
Thomae as saying that the Third Legate or Srôsh is “the
Legate of the five members, Nous, Ennoia, Phronesis,
Enthymesis and Logismos.” From all which we may gather
that the Supreme God of Light and his “Second” and “Third”
creations were each alike thought to have the same five
dwellings or hypostases consisting of abstract qualities,
although the exact significance of the names given to them for
the present escapes us.

1120. This is the usual Oriental and Semitic figure of speech which
leads Arabs at the present day to nickname any European
with a large beard “the Father of Hair,” and makes the Sphinx
of Ghizeh the “Father of Terrors.” In the same way, the Mother
of Life means doubtless the Very Great Life or Source of Life.

1121. Cumont, Cosmog. Manich. p. 15.

1122. See the Khuastuanift, pp. 335, 342 infra, and the Tun-huang
treatise (Chavannes et Pelliot, op. cit. p. 513, and n. 1). Cf.
also Müller, Handschriften-Reste, p. 102.

1123. She cannot possibly be the Virgin of Light, as in the Acta she
is said to retire at the Ecpyrosis into the Moon-ship along with
that personage. See Hegemonius, op. cit. c. XIII. p. 21,
Beeson. The name “Virgin of Light” also appears in the Turfan
texts as an epithet of Jesus, if the words are not wrongly
translated. See Müller, Handschriften-Reste, pp. 75, 77. The
name Nahnaha given her by En Nadîm has been referred to
in n. 2, p. 300 supra.

1124. Probably Mithras, who is in the Vedas and elsewhere called

“Mithra the Friend.” Mithras is invoked under his own name in
the Turfan texts (Müller, Handschriften-Reste, p. 77), but the
fragment is too mutilated to be able to deduce from it his
place in the pantheon.
1125. This name, to be found nowhere but in Bar Khôni, cannot be
explained. Pognon says it may be written the Great Laban,
which gets us no nearer to its meaning.

1126. The image is probably his body or substance, which is of the

substance of the Very Great Father. So Satan is in the Coptic
Trattato gnostico of Rossi quoted in n. 2, p. 300 supra
described as the ἀρχηπλάσμα, probably as being the very
substance of darkness as the Very Great Father is of the
Light.

1127. This is the conjecture of M. Cumont (Cosmog. Manich. pp. 24,

25). As he says in note 5 on the first-mentioned page, the
passage as it stands is inconsistent. The Appellant and
Respondent under the names of Kroshtag and Padwakhtag
appear in the Khuastuanift and also in the Tun-huang treatise
(pp. 521 sqq.) without the part they play in the world being
immediately apparent. The former document, however (see p.
343 infra), speaks of them as being concerned in the
purification of the Light. MM. Chavannes and Pelliot (op. cit. p.
521, n. 1) think it possible that they may represent the
portions of the “armour” of the First Man which were not
sullied by contact with matter, and compare them to the last
two Amshaspands, Haurvetât and Ameretât. See also their
Traité Manicheen, etc. 2me ptie, in the Journal Asiatique, XI
série, t. I. (1913), p. 101. One might liken them to the Cautes
and Cautopates appearing in the Mithraic monuments, as to
which see Chapter XII, p. 246 supra.

1128. All these subordinate deities were known to St Augustine. Cf.

id. c. Faust. Bk XV. c. 6.

1129. Evidently Manes accepted the dictum of Valentinus quoted

above (Chap. IX, p. 104 supra), that with celestial powers it is
always the female who gives the form.

1130. Hegemonius, Acta, c. XIII, p. 21, Beeson. Αἱ δὲ προβολαὶ

πᾶσαι, ὁ Ἰησοῦς ὁ ἐν τῷ μικρῷ πλοίῳ, καὶ ἡ μήτηρ τῆς ζωῆς,
 καὶ οἱ δώδεκα κυβερνῆται, καὶ ἡ παρθένος τοῦ φωτὸς καὶ ὁ
πρεσβύτης ὁ τρίτος ὁ ἐν τῷ μεγάλῳ πλοίῳ, καὶ τὸ ζῶν πνεῦμα
καὶ τὸ τεῖχος τοῦ μεγάλου πυρὸς καὶ τὸ τεῖχος τοῦ ἀνέμου, καὶ
τοῦ ἀέρος, καὶ τοῦ ὕδατος, καὶ τοῦ ἔσωθεν πυρὸς τοῦ ζῶντος
πρὸς τὸν μικρὸν φωστῆρα οἰκοῦσιν, ἄχρις ἂν τὸ πῦρ
κατανελώσῃ τὸν κόσμον ὅλον· ἐν ποσοῖς πότε ἔτεσιν, ὧν οὐκ
ἔμαθον τὴν ποσότητα. “But all the emanations [i.e.], Jesus
who is in the small ship, and the Mother of Life and the 12
pilots, and the Virgin of Light, and the Third Legate who is in
the large ship, and the Living Spirit and the wall [it should be
‘guardian,’ as MM. Chavannes and Pelliot explain] of the great
fire, and the guardian of the Ether, and of the air, and of the
water, and of the inner living fire, abide near the lesser light
until the fire has consumed the whole Cosmos. But for how
many years I have not learned.” The Latin version runs:
Prolationes autem omnes Jesus in modica navi, et mater vitae
et duodecim gubernatores et virgo lucis et senior tertius. Unde
et majori in navi vivens spiritus adhibetur, et murus ignis illius
magni, et murus venti et aeris et aquae et interioris ignis vivi,
quae omnia in luna habitabunt usquequo totum mundum ignis
absumat; in quot autem annis numerum non didici:—which
appears to be nonsense. The number of years which Turbo,
who is here speaking, had not learned, is said by En Nadîm to
be 1468.

1131. Cumont, Cosmog. Manich. pp. 58 sqq. and Appendix I.

1132. Chavannes et Pelliot, op. cit. (1ère ptie), p. 522, and n. 1. For
the part played by him in the Chinese treatise see op. cit. p.
536, and n. 2. He is called “Mighty Srôsh” in the Turfan texts
(Müller, Handschriften-Reste, p. 75).

1133. J. Darmesteter, The Zend Avesta, part I. (S. B. E. vol. 4, pp.

87, 99) and part II. (S. B. E. vol. 23, pp. 159-167). All the
passages in which he is referred to come from the Vendidad,
but he is also mentioned in the Bundahish. See West, Pahlavi
Texts, part I. (S. B. E. vol. 5, p. 128).
1134. See n. 2 supra. M. Cumont (Cosmog. Manich. p. 34) thinks
that this Messenger was added to the two triads (of Father,
Mother, and Son, and the Friend of the Lights, Great Ban, and
Living Spirit, respectively) in order to make up “the sacred
number of seven.” But seven is a number singularly neglected
by the Manichaeans, who paid the greatest reverence to five,
and preferred to seven the three and the twelve. Nor do I think
that there is any real parallel in Manichaeism to the Seven
Amshaspands of Zoroastrianism. The actual word
amshaspand is used in the Tun-huang treatise (Chavannes et
Pelliot, op. cit. 1ère ptie, p. 544), but with an entirely different
signification from that of archangel or divinity. It seems there
to mean simply “element.” Cf. Chavannes et Pelliot, op. cit.
2me partie, p. 101.

1135. I can find no parallel to these powers in any other system,

save that of the Pistis Sophia, where appear twelve Saviours
of the Treasure-house of Light, from whom the souls of the
Twelve Apostles of Jesus were said to be drawn. If, therefore,
they are not the signs of the Zodiac, they may be an invention
of the Manichaeans to accord with the magistri or highest
order of their Church (see p. 330 infra).

1136. Cumont, Cosmog. Manich. p. 36.

1137. Pognon, op. cit. pp. 189, 190. He says it was the Messenger
(or Srôsh) who ordered the Great Ban to create a new world.
M. Kugener, however (Cumont, Cosmog. Manich. p. 37, n. 4),
says that the passage can be read as in the text, and this
avoids the improbability of the younger power or Third Legate
giving orders to one of the “second creation.” The three
wheels, fire, water, and earth, may possibly have been
conceived as surrounding the earth, as with the Ophites of the
Diagram. Cf. Chap. VIII, n. 3, p. 74 supra.

1138. I read this, perhaps wrongly, thus instead of Five Trees as

does Pognon (op. cit. p. 191). The five kinds of trees are often
referred to in the Tun-huang treatise and in the Khuastuanift.
1139. This Saclas, who appears many times in Greek heresiology
with his wife Nebrod, called in the text Namraël (for
references, see Cumont, Cosmog. Manich. p. 73, and notes
3, 4, and 5), was known to Hippolytus, who uses both names
in his description of the tenets of the Peratae, a name which
may be equivalent to that of the Medes. See Hipp. Philosoph.
Bk V. c. 14, pp. 194, 195, Cruice.

1140. Chavannes et Pelliot, op. cit. 1ère ptie, p. 566, and n. 3.

1141. Hegemonius, Acta, c. XI. p. 18, Beeson.

1142. Augustine, de Haeresibus, c. 46, p. 210, Oehler. See also

Chavannes et Pelliot, op. cit. 1ère ptie, p. 569, and n. 2; p. 572,
and nn. 2, 3; and p. 581, and n. 4. MM. Chavannes and Pelliot
discuss the question of the organization of the Manichaean
Church in the second part of their memoir. See op. cit. 2me
ptie, pp. 193, 196 and n. 2. They also give a dissertation on
the common life of the Elect. It remains to be seen whether
this was anything more than a copy of the monastic
institutions of the Buddhists. For obvious reasons, such an
organization was not adopted in lands where they had
outwardly to conform to other religions.

1143. So Professor Harnack and Mr Conybeare in the Encyc. Brit.

(XIth ed.), vol. XVII. p. 576, s.v. Manichaeism.

1144. “Beatus pater” is the name given to the Tertius legatus by

Evodius, de recta fide, passim.

1145. Augustine, c. Faust. Bk XV. c. 5.

1146. Op. cit. Bk XX. c. 9.

1147. Cumont, Cosmog. Manich. App. 2, “L’Omophore.” He shows

that this belief in an angel who supports the world on his
shoulders goes back to the Assyrian cylinder-seals, where is
 found a world-bearing divinity in exactly the same pose as
that reproduced in the Mithraic bas-reliefs.

1148. One of the silk banners obtained by the German expedition

seems to have depicted this scene. See A. von Le Coq,
Chotscho: Facsimile-Wiedergaben der Wichtigerer Funde der
Ersten Kgl. Preuss. Expedition nach Turfan, Berlin, 1913, Bd
1, p. 1 and Pl. IV. 6.

1149. Augustine, c. Faust. Bk XX. c. 17. Is the prayer addressed to

the First Man or to Splenditenens, whom St Augustine
represents as mourning over the pollution of the Light?

1150. The praises in the text are all given by En Nadîm. See Flügel,
op. cit. p. 96. Are “the two sciences” the Living Spirit and his
Intelligence or Reason? If so the “Father of Majesty” probably
means the Beatus Pater of note 2, p. 331 supra.

1151. The Mediaeval Inquisitors were in especial never tired of

denouncing the immorality of the Manichaean Hearers. See
H. C. Lea, History of the Inquisition, index.

1152. The original documents are described by Prof. A. von Le Coq

in “Turkish Khuastuanift from Tun-huang,” J.R.A.S. 1911, pp.
277-279.

1153. There are many allusions in Manichaean literature to three

worlds of light, which seem to be (1) the light inaccessible, or
heaven of God; (2) the light intelligible, i.e. that can be
comprehended by the mind only, which is inhabited by the
First Man; and (3) the perceptible light, of which the Sun and
Moon are the rulers. See especially Chavannes et Pelliot, op.
cit. 1ère ptie, pp. 564 and 586, and 2me ptie, p. 102, n. 2. The
Manichaeans’ addiction to the number five needs no
insistence. Fifteen, i.e. 3 × 5, is therefore a number which
came naturally to them.