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Chapter 06 - Reporting and Interpreting Sales Revenue, Receivables, and Cash
CHAPTER 6
REPORTING AND INTERPRETING
SALES REVENUE, RECEIVABLES, AND CASH
Learning Objectives and Related Assignment Materials
Mini- Alternate Cases and

Learning Objectives Exercises Exercises Problems Problems Projects
1. Apply the revenue realization 1 1 2, 4, 5
principle to determine the accepted
time to record sales revenue for typical
retailers, wholesalers, manufacturers,
and service companies.
2. Analyze the impact of credit card 2, 3 1, 2, 3, 4, 2, 5 1, 4
sales, sales discounts, and sales returns 5
on the amounts reported as net sales.
3. Estimate, report, and evaluate the 4, 5 6, 7, 8, 9, 2, 3, 4, 5 1, 2, 3, 4 1, 2, 3, 7
effects of uncollectible accounts 10, 11,
receivable (bad debts) on financial 12, 13,
statements. 14, 15,
16, 17,
18
4. Analyze and interpret the receivable 6 19, 20, 5 4 1
turnover ratio and the effects of 21
accounts receivable on cash flows.
5. Report, control, and safeguard cash. 7 22, 23 6, 7 5 1, 2, 3, 6
Chapter Supplement: Recording discounts 8 24 9
and returns
Synopsis of Chapter Revisions
Focus Company: Deckers Outdoor Corporation
▪ Focus and contrast company data updated.
▪ Content narrowed to three related topics: computing and reporting net sales, receivables valuation, and
control of cash.
▪ Coverage of gross profit percentage moved to Chapter 5.
▪ Exhibits reorganized to better reflect the chapter flow.
▪ Coverage of bad debt recoveries increased.
▪ Coverage of electronic banking increased.
▪ New GUIDED HELP feature provides free access to step-by-step video instruction on preparing entries
related to bad debts and determining their financial statement effects.
▪ New CONTINUING CASE added to the end-of-chapter problems. Students are asked to make summary
entries for bad debts and compute the amount to be reported as net sales for Pool Corporation, a public
company.
▪ New and updated real companies, as well as modified accounts, names, and amounts for fictional
companies in end-of-chapter exercises, problems, and cases.
6-1
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
PowerPoint Slides
Learning Objectives PowerPoint® Slides

1. Apply the revenue realization principle to determine the accepted time to 6-1 through 6-2
record sales revenue for typical retailers, wholesalers, manufacturers, and
service companies.
2. Analyze the impact of credit card sales, sales discounts, and sales returns on 6-3 through 6-7
the amounts reported as net sales.
3. Estimate, report, and evaluate the effects of uncollectible accounts 6-8 through 6-18
receivable (bad debts) on financial statements.
4. Analyze and interpret the receivable turnover ratio and the effects of 6-19 through 6-22
accounts receivable on cash flows.
5. Report, control, and safeguard cash. 6-23 through 6-29
Chapter Supplement: Recording discounts and returns 6-30 through 6-32
Related Video Programs
McGraw-Hill/Irwin Financial Accounting Video Series

Program #6 – Merchandisers (7:30)
After comparing the operations of service providers with merchandisers, the related differences on the
balance sheet and income statement are highlighted. Then, a line-by-line look at a merchandiser’s multi-
step income statement is provided. The importance of inventory management is stressed. On-Target
Supplies and Logistics is a real world example of a company that uses electronic data gathering, but also
performs a physical inventory count to ensure that its records are accurate. Radio Shack is a real world
example of a company that is concerned with the loss of inventory. The video concludes with overviews
of the perpetual and periodic inventory methods.
Program #9 – Valuation of Receivables (9:42)
After stressing the risks involved in granting credit, the video program notes that there are two ways of
accounting for uncollectible accounts. The direct method is overviewed and the journal entry to write-off
of a customer account is illustrated. After noting that this method violates the expense matching principle,
the use of the allowance method to overcome this problem is addressed. Both two approaches for
estimating the amount of uncollectible accounts (i.e., the percentage of credit sales and percentage of
receivables methods) are briefly illustrated. Blue Bell Creameries is a real world example of a company
that uses the direct write-off method during the year and then applies the allowance method at the end of
the year. The journal entries to record uncollectible accounts expense and write-off of customer accounts
are illustrated and the effects on the balance sheet are addressed. The terminology relating to notes
receivable is overviewed and the various journal entries are illustrated. The Associates is a real world
example of some of the procedures used to collect overdue accounts. Allegheny Teledyne is a real world
example of the segregation of duties in the collection of receivables. The video concludes with an
explanation of the usefulness of the receivable turnover ratio to monitor performance.
6-2
Education.
Summary of Related Video Programs, continued
Program #8 – Internal Control and Cash (10:09)

A variety of companies are featured. Scenes with an old-fashioned private investigator provide transition.
Casio Queen is a real world example of the need for internal controls when the handling of cash is
prevalent. Related regulatory requirements in this industry are explored. The benefits of, and need for,
separation of duties are overviewed. Radio Shack is a real world example of the special requirements of
retailers with numerous locations. The importance of ongoing enforcement of internal control policies and
procedures and required follow-up procedures are addressed. The use of periodic physical inventories for
reconciliation purposes is briefly addressed. The consequences of lack of compliance with internal control
policy and procedures are explored. The need to accept internal control risk in given circumstances is
addressed. The video concludes with an overview of common internal control policies and procedures.
Chapter Take-Aways
1. Apply the revenue realization principle to determine the accepted time to record sales revenue
for typical retailers, wholesalers, manufacturers, and service companies.
Revenue recognition policies are widely recognized as one of the most important determinants of the
fair presentation of financial statements. For most merchandisers and manufacturers, the required
revenue recognition point is the time of shipment or delivery of goods. For service companies, it is
the time that services are provided.
2. Analyze the impact of credit card sales, sales discounts, and sales returns on the amounts
reported as net sales.
Both credit card discounts and sales or cash discounts can be recorded either as contra-revenues or
as expenses. When recorded as contra-revenues, they reduce net sales. Sales returns and allowances,
which should always be treated as a contra-revenue, also reduce net sales.
3. Estimate, report, and evaluate the effects of uncollectible accounts receivable (bad debts) on
financial statements.
When receivables are material, companies must employ the allowance method to account for
uncollectibles. These are the steps in the process:
a. The end-of-period adjusting entry to record bad debt expense estimates.
b. Writing off specific accounts determined to be uncollectible during the period.
The adjusting entry reduces net income as well as net accounts receivable. The write-off affects
neither.
4. Analyze and interpret the receivable turnover ratio and the effects of accounts receivable on
cash flows.
a. Receivable turnover ratio—Measures the effectiveness of credit granting and collection
activities. It reflects how many times average trade receivables were recorded and collected
during the period. Analysts and creditors watch this ratio because a sudden decline in it may
mean that a company is extending payment deadlines in an attempt to prop up lagging sales or
even is recording sales that later will be returned by customers.
b. Effects on cash flows—When a net decrease in accounts receivable for the period occurs, cash
collected from customers is always more than revenue, and cash flows from operations increases.
When a net increase in accounts receivable occurs, cash collected from customers is always less
than revenue. Thus, cash flows from operations declines.
6-3
Education.
Chapter Take-Aways, continued

5. Report, control, and safeguard cash.
Cash is the most liquid of all assets, flowing continually into and out of a business. As a result, a
number of critical control procedures, including the reconciliation of bank accounts, should be
applied. Also, management of cash may be critically important to decision makers who must have
cash available to meet current needs yet must avoid excess amounts of idle cash that produce no
revenue.
Key Ratio
Receivables turnover ratio measures the effectiveness of credit-granting and collection activities. It is
computed as follows:
Receivables Turnover = Net Sales  Average Net Trade Accounts Receivable
Finding Financial Information

BALANCE SHEET INCOME STATEMENT
Under Current Assets Revenues
Accounts receivable (net of allowance for Net sales (sales revenue less discounts and
doubtful accounts) sales returns and allowances)
Expenses
Selling expenses (including bad debt expense)
STATEMENT OF CASH FLOWS NOTES

Under Operating Activities (indirect Under Summary of Significant
method) Accounting Policies
Net income Revenue recognition policy
+ decreases in accounts receivable (net) Under a Separate Note on Form 10-K
− increases in accounts receivable (net) Bad debt expense and write-offs of bad debts
6-4
Education.
Chapter Outline Teaching Notes

LO 1 – Apply the revenue realization principle to determine the accepted time to record sales revenue
for typical retailers, wholesalers, manufacturers, and service companies.
I. Understanding the Business
A. Net Sales (Revenue) is reported first on the income statement Illustrated in Exhibit 6.1
B. Coordinating sales and cash collections from customers also
involves managing bad debts
II. Accounting for Sales Revenue Show Video Program #6
A. Revenue realization principle As discussed in chapter 3
1. Requires that revenues be recorded when they are earned
a. Delivery has occurred or services have been rendered
b. There is persuasive evidence of an arrangement for
customer payment
c. The price is fixed or determinable, and collection is
reasonably assured)
2. For sellers of goods, these criteria are most often met and
sales revenue is recorded when title and risks of
ownership transfer to the buyer
a. The point at which title (ownership) changes hands is
determined by the shipping terms in the sales contract
b. When goods are shipped FOB (free on board) shipping
point:
i. Title changes hands at shipment, and the buyer
normally pays for shipping
ii. Revenues are normally recognized at shipment
c. When they are shipped FOB destination:
i. Title changes hands on delivery, and the seller
normally pays for shipping
ii. Revenues are normally recognized at delivery
3. Service companies most often record sales revenue when
they have provided services to the buyer
4. Revenue recognition rule is disclosed in a footnote to the
financial statements entitled Summary of Significant
Accounting Policies
5. Appropriate amount of revenue to record is the cash
equivalent sales price
B. Motivating Sales and Collection
1. Sales practices differ depending on whether sales are
made to businesses or customers
2. Methods to motivate customers to buy products and make
payments include:
a. Allowing customers to use credit cards to pay for
purchases.
b. Providing business customers direct credit and
discounts for early payment
c. Allowing returns from all customers under certain
conditions
6-5
Education.
LO 2 – Analyze the impact of credit card sales, sales discounts, and sales returns on the amounts
reported as net sales.
C. Credit Card Sales to Consumers
1. Managers decided to accept credit cards to:
a. Increase customer traffic
b. Avoid the costs of providing credit directly to
consumers, including recordkeeping and bad debts
c. Lower losses due to bad checks
d. Avoid losses from fraudulent credit card sales
e. Receive money faster (credit card receipts are directly
deposited in its bank account)
2. Credit card discount – Fee charged by the credit card
company for the service it provides
3. Sales revenue – Credit card discounts = Net sales
D. Sales Discounts to Businesses
1. Most sales to businesses are credit sales on open account
(there is no formal written promissory note or credit card)
2. Credit terms of n/30 – The full price is due within 30 days
of the invoice date; the n means the sales amount net of,
or less, any sales returns
3. Sales discount – Granted to purchaser to encourage early Accounting discussed in more
payment detail in Chapter Supplement
a. Terms of 2/10, n/30:
i. The customer may deduct 2% from the invoice
price if cash payment is made within 10 days of
date of sale
ii. If cash payment is not made within the 10-day
discount period, the full sales price (less any
returns) is due within a maximum of 30 days
b. Sales discounts provide two benefits:
i. Prompt receipt of cash from customers reduces the
necessity to borrow money to meet operating needs See Financial Analysis
ii. Customers tend to pay bills proving discounts first; feature “To Take or Not to
a sales discount also decreases the chances that the Take the Discount, That is the
customer will run out of funds before the Question”
company’s bill is paid
E. Sales Returns and Allowances
1. Sales returns and allowances – Reduction of sales Accounting discussed in more
revenues for return of or allowances for unsatisfactory detail in Chapter Supplement
goods
a. Returns are often accumulated in a separate account
called Sales Returns and Allowances
b. Sales Returns and Allowances are deducted from
gross sales revenue in determining net sales
2. Cost of goods sold (related to the goods returned) is also
reduced
6-6
Education.
F. Reporting Net Sales

1. Credit Card Discounts, Sales Discounts, and Sales
Returns and Allowances are accounted for separately to
allow managers to monitor the costs of credit card use,
sales discounts, and returns
2. Sales revenue Illustrated in Exhibit 6.1
Less: Credit Card Discounts (a contra-revenue)
Sales Discounts (a contra-revenue)
Sales Returns and Allowances (a contra-revenue)
Net Sales (reported on the income statement) Refer students to Pause for
3. Net Sales – Cost of Goods Sold = Gross Profit Feedback – Self-Study Quiz
III. Measuring and Reporting Receivables
A. Classifying Receivables
1. Accounts receivable – Created by a credit sale on open
account
2. Notes receivable – Written promises that require another
party to pay the business under specified conditions
(principal, maturity date, and specified amount of
interest)
3. Classifications
a. Trade receivable – Created in the normal course of
business when a sale of merchandise or services on
credit occurs
b. Nontrade receivable – arises from transactions other
than the normal sale of merchandise or services
c. In a classified balance sheet, receivables are classified See International Perspective
as either current or noncurrent (short term or long feature “Foreign Currency
term), depending on when the cash is expected to be Receivables”
collected
LO 3 – Estimate, report, and evaluate the effects of uncollectible accounts receivable (bad debts) on
financial statements.
B. Accounting for Bad Debts Show Video Program #9
1. Subsidiary account:
a. A separate accounts receivable account maintained for
each customer
b. The accounts receivable amount on the balance sheet
represents the total of these individual customer
accounts
2. When a company sells on credit, it knows that some of
these customers will not pay their debts
a. Expense matching principle requires recording of bad
debt expense in the same accounting period in which
the related sales are made
b. Company may not learn know which customers will
not pay until the next accounting period
6-7
Education.
3. Allowance method – bases bad debt expense on an

estimate of uncollectible accounts; two primary steps:
a. Making the end-of-period adjusting entry to record
estimated bad debt expense
b. Writing off specific accounts determined to be
uncollectible during the period
C. Recording Bad Debt Expense Estimates
1. Bad Debt Expense (Doubtful Accounts Expense,
Uncollectible Accounts Expense, Provision for
Uncollectible Accounts) – Expense associated with
estimated uncollectible accounts receivable
2. An adjusting journal entry at the end of the accounting
period records the bad debt estimate
3. Deckers estimated bad debt expense to be $75,995
dr Bad Debt Expense (+E, –SE) 75,995
cr Allowance for Doubtful 75,995
Accounts (+XA, –A)
Assets = Liabilities + Stockholders’ Equity
Allowance for Doubtful Accounts (XA) – 75,995 = Bad
Debt Expense (E) – 75,995
4. Bad Debt Expense is included in Selling Expenses on the
income statement; decreases net income and
stockholders’ equity
5. Accounts Receivable is not credited because the company
does not know which customers will not pay
6. Credit is made instead to the Allowance for Doubtful
Accounts (Allowance for Bad Debts, Allowance for
Uncollectible Accounts) – Contra-asset account
containing the estimated uncollectible accounts receivable
7. As a contra-asset, the balance in Allowance for Doubtful
Accounts is always subtracted from the balance in
Accounts Receivable
8. This adjusting entry decreases the net book value of
Accounts Receivable and total assets
D. Writing Off Specific Uncollectible Accounts
1. When it is determined that a customer will not pay its
debts, a write-off is recorded in a journal entry
2. The specific uncollectible customer account receivable,
now identified, is removed with a credit
3. The related estimate is no longer needed in the contra-
asset Allowance for Doubtful Accounts and is removed
by a debit
4. Deckers’ total write-offs were $68,075
dr Allowance for Doubtful 68,075
Accounts (–XA, +A)
cr Accounts Receivable (–A) 68,075
Allowance for Doubtful Accounts (XA) + 68,075 +
Accounts Receivable (A) – 68,075 = 0
6-8
Education.
5. This journal entry did not:

a. Affect any income statement accounts
b. Record a bad debt expense because the estimated
expense was recorded with an adjusting entry in the
period of sale
c. Change the net book value of accounts receivable,
since the decrease in the asset account (Accounts
Receivable) was offset by the decrease in the contra-
asset account (Allowance for Doubtful Accounts).
d. Affect total assets
6. When a customer makes a payment on an account that Use Supplemental
has already been written off: Enrichment Activity #1
a. The journal entry to write off the account is reversed
to put the receivable back on the books
b. The collection of cash is recorded
dr Accounts Receivable (+A) 677
cr Allowance for Doubtful 677
Accounts (+XA, –A)
dr Cash (+A) 677
cr Accounts Receivable (–A) 677
Cash (A) +677 + Allowance for Doubtful Accounts (XA)
–677 = 0
E. Reporting Accounts Receivable and Bad Debts
1. Reporting of accounts receivable, net of allowance for Illustrated in Exhibit 6.2
doubtful accounts (the net book value)
a. Balance in the Allowance for Doubtful Accounts is
reported within the account title on the balance sheet
or in a note
b. Accounts Receivable (Gross), the total accounts
receivable, can be computed by adding the two
amounts together
2. The amounts of bad debt expense and accounts receivable Illustrated in Exhibit 6.3
written off for the period are reported on a schedule that
publicly traded companies include in their Annual Report Refer students to Pause for
Form 10-K filed with the SEC Feedback – Self-Study Quiz
F. Estimating Bad Debts
1. Bad debt expense is often estimated based on either a
percentage of total credit sales for the period or an aging
of accounts receivable
a. Both methods are acceptable under GAAP and are
widely used
b. The percentage of credit sales method is simpler to
apply, but the aging method is generally more accurate
6-9
Education.
2. Percentage of Credit Sales Method

a. Bases bad debt expense on the historical percentage of
credit sales that result in bad debts
b. Average percentage of credit sales that result in bad
debts can be computed by dividing total bad debt
losses by total credit sales
c. Amount is directly recorded as Bad Debt Expense Use Supplemental
(and an increase in Allowance for Doubtful Accounts) Enrichment Activity #2
in the current year
d. Beginning balance of Allowance for Doubtful
Accounts account + Bad debt expense − Write-offs =
Ending balance
3. Aging of Accounts Receivable
a. Estimates uncollectible accounts based on the age of
each account receivable
b. Relies on the fact that, as accounts receivable become
older and more overdue, it is less likely that they will
be collectible
c. Steps:
i. The individual customer accounts receivable are
sorted into aging categories
ii. Based on experience, the probable bad debt loss
rates for each category is estimated (e.g., not yet
due, 2%; 1 to 90 days past due, 10%; over 90 days,
30%)
iii. The total accounts receivable in each age category
is multiplied by its probable bad debt loss rate
iv. The estimated amount uncollectible for each of the
age categories is totaled; this total equals the
estimate of total uncollectible amounts
v. This total is the desired ending balance in the Use Supplemental
Allowance for Doubtful Accounts; an adjustment is Enrichment Activity #3
made to bring that account balance to this estimate
vi. The desired ending balance in Allowance for
Doubtful Accounts minus the unadjusted credit
balance in Allowance for Doubtful Accounts
equals the Bad Debt Expense for the year
4. Comparison of Two Methods
a. The approach to recording bad debt expense using the
percentage of credit sales method is different from that
for the aging method
b. Percentage of credit sales – Directly compute the
amount to be recorded as Bad Debt Expense on the
income statement for the period in the adjusting
journal entry
6-10
Education.
c. Aging
i. Compute the estimated ending balance we would
like to have in the Allowance for Doubtful
Accounts on the balance sheet after we make the
necessary adjusting entry
ii. The difference between the current balance in the
account and the estimated balance is recorded as
the adjusting entry for Bad Debt Expense for the
period
d. In either case, the balance sheet presentation would
show Accounts Receivable, less Allowance for
Doubtful Accounts
5. Actual Write-Offs Compared with Estimates
a. If uncollectible accounts actually written off differ
from the estimated amount previously recorded, a
higher or lower amount is recorded in the next period
to make up for the previous period’s error in estimate
b. When estimates are found to be incorrect, financial
statement values for prior annual accounting periods
are not corrected
G. Control over Accounts Receivable
1. Companies that emphasize sales without monitoring the
collection of credit sales soon find much of their current
assets tied up in accounts receivable
2. The following practices can help minimize bad debts:
a. Require approval of customers’ credit history by a
person independent of the sales and collections
functions
b. Age accounts receivable periodically and contact
customers with overdue payments
c. Reward both sales and collections personnel for
speedy collections so that they work as a team
LO 4 – Analyze and interpret the receivable turnover ratio and the effects of accounts receivable on
cash flows.
F. Key Ratio Analysis – Receivables Turnover Ratio
1. Receivables Turnover = Net Sales ÷ Average Net Trade
Accounts Receivable
2. Ratio reflects how many times average trade receivables
are recorded and collected during the period
3. The higher the ratio, the faster the collection of Refer students to Pause for
receivables Feedback – Self-Study Quiz
G. Effect on Statement of Cash Flows
1. If net decrease in accounts receivable, cash collected from Illustrated in Exhibit 6.4
customers is more than revenue; decrease must be added
in computing cash flows from operations
2. If net increase in accounts receivable, cash collected from Refer students to Pause for
customers is less than revenue; increase must be Feedback – Self-Study Quiz
subtracted in computing cash flows from operations
6-11
Education.
LO 5 – Report, control, and safeguard cash.

IV. Reporting and Safeguarding Cash Show Video Program #8
A. Cash and Cash Equivalents Defined
1. Cash – money or any instrument that banks will accept
for deposit and immediate credit to a company’s account,
such as a check, money order, or bank draft
2. Cash equivalents are investments that meet two criteria:
a. Original maturities of three months or less
b. Readily convertible to cash and whose value is
unlikely to change (that is, they are not sensitive to
interest rate changes)
3. All bank accounts and cash equivalents are combined into
one amount, Cash and Equivalents, on the balance sheet
4. The book values of cash equivalents on the balance sheet
equal their fair market values
B. Cash Management – responsibilities include:
1. Accurate accounting so that reports of cash flows and
balances may be prepared
2. Controls to ensure that enough cash is available to meet
(a) current operating needs, (b) maturing liabilities, and
(c) unexpected emergencies
3. Prevention of the accumulation of excess amounts of idle
cash; idle cash earns no revenue
C. Internal Control of Cash
1. Internal controls – Pprocesses by which a company
safeguards its assets and provides reasonable assurance
regarding the reliability of the company’s financial
reporting, the effectiveness and efficiency of its
operations, and its compliance with applicable laws and
regulations
2. Cash is most vulnerable to theft and fraud; a significant
number of internal control procedures focus on cash
a. Separation of duties:
i. Complete separation of the jobs of receiving cash
and disbursing cash
ii. Complete separation of the procedures of
accounting for cash receipts and cash
disbursements
iii. Complete separation of the physical handling of
cash and all phases of the accounting function
b. Prescribed policies and procedures:
i. Require that all cash receipts be deposited in a
bank daily; keep any cash on hand under strict
control
6-12
Education.
ii. Require separate approval of the purchases and the

actual cash payments; prenumbered checks should
be used and special care must be taken with
payments by electronic funds transfers since they
involve no controlled documents (checks)
iii. Assign the responsibilities for cash payment
approval and check-signing or electronic funds
transfer transmittal to different individuals See A Question of Ethics
iv. Require monthly reconciliation of bank accounts feature “Ethics and the Need
with the cash accounts on the company’s books for Internal Control”
D. Reconciliation of Cash Accounts and the Bank Statements
1. Content of a Bank Statement
a. Bank statement – monthly report from a bank that Illustrated in Exhibit 6.5
shows deposits recorded, checks cleared, other debits
and credits, and a running bank balance
b. EFT – code for electronic funds transfers
c. NSF (not sufficient funds) – signifies that the bank
processed a check through banking channels to the
customer’s bank, but the account did not have
sufficient funds to cover the check
i. The customer’s bank therefore returned it to the
company’s bank, which then charged it back to
company’s account
ii. The NSF check is now a receivable; consequently,
the company must make an entry to debit
Receivables and credit Cash
d. SC – code for bank service charges
e. INT – code for interest earned
2. Need for Reconciliation
a. Bank reconciliation – Process of verifying the
accuracy of both the bank statement and the cash
accounts of a business
i. Should be completed at the end of each month
ii. Usually, the ending cash balance on the bank
statement does not agree with the ending cash
balance in the company’s Cash account
b. The most common causes of differences:
i. Outstanding checks – Checks written by the
company and recorded in the company’s ledger as
credits to the Cash account that have not cleared
the bank; identified by comparing the list of
canceled checks on the bank statement with the
record of checks (such as check stubs or a journal)
maintained by the company
6-13
Education.
ii. Deposits in transit – Deposits sent to the bank by

the company and recorded in the company’s Cash
account) but not yet by the bank; determined by
comparing the deposits listed on the bank statement
with the company deposit records
iii. Bank service charges – Expenses for bank services
listed on the bank statement but not recorded on the
company’s books
iv. NSF checks – “Bad checks” or “bounced checks”
that have been deposited but must be deducted
from the company’s cash account and rerecorded
as accounts receivable
v. Interest – Paid by the bank to the company on its
bank balance
iv. Errors – Both the bank and the company may make
errors
3. Bank Reconciliation Illustrated Illustrated in Exhibit 6.6
a. Steps:
i. Identify the outstanding checks
ii. Identify the deposits in transit.
iii. Record bank charges and credits
iv. Determine the impact of errors
4. Bank reconciliation accomplishes two major objectives:
a. It checks the accuracy of the bank balance and the Use Supplemental
company cash records Enrichment Activity #4
b. It identified any transactions or changes on the Use Supplemental
company’s books side of the bank reconciliation need Enrichment Activity #5
journal entries
i. All of the additions and deductions on the
company’s books side of the reconciliation need
journal entries to update the Cash account
ii. The additions and deductions on the bank Refer students to Pause for
statement side do not need journal entries Feedback – Self-Study Quiz
6-14
Education.
V. Chapter Supplement: Recording Discounts and Returns

A. The credit card company is charging a 3 percent fee for its
service and Deckers’ Internet credit card sales are $3,000,
dr Cash (+A) 2,910
dr Credit Card Discounts (+XR, –R, 90
–SE)
cr Sales Revenue (+R, +SE) 3,000
Cash (A) + 2,190 = Credit Card Discounts (XR) – 90 +
Sales Revenue (R) + 3,000
B. Credit sales of $1,000 are recorded with terms 2/10, n/30
($1,000 × 0.98 = $980), and payment is made within the
discount period
dr Accounts Receivable (+A) 1,000
Accounts Receivable (A) + 1,000 = Sales Revenue (R)
+ 1,000
dr Cash (+A) 980
dr Sales Discount (+XR, –R, –SE) 20
cr Accounts Receivable (–A) 1,000
Cash (A) + 980 + Accounts Receivable (A) – 1,000 = Sales
Discount (XR) – 20
C. Fontana Shoes of Ithaca, New York, buys 40 pairs of sandals
from Deckers for $2,000 on account
dr Accounts Receivable (+A) 2,000
Accounts Receivable (A) + 2,000 = Sales Revenue (R)
+ 2,000
D. Before paying for the sandals, however, Fontana discovers
that 10 pairs of sandals are not the color ordered and returns
them to Deckers
dr Sales Returns and Allowances 500
(+XR, –R, –SE)
cr Accounts Receivable (–A) 500
Assets = Liabilities + Stockholders’ Equity Use Supplemental
Accounts Receivable (A) – 500 = Sales Returns and Enrichment Activity #6
Allowances (XR) – 500
6-15
Education.
Supplemental Enrichment Activities
Note: These activities would be suitable for individual or group activities.
1. Handout 6-1
Use Handout 6-1 for an in-class activity designed to review the preparation of journal entries relating
to accounts receivable (sales, collections on account, write-off, and recoveries). The solution follows
the handout master.
2. Handout 6-2
Use Handout 6-2 for an in-class activity designed to review the estimation of uncollectible accounts
using the percentage of credit sales method. The solution follows the handout master.
3. Handout 6-3
Use Handout 6-3 for an in-class activity designed to review the estimation of uncollectible accounts
using the aging of accounts receivable method. The solution follows the handout master.
4. Handout 6-4
Use Handout 6-4 for an in-class activity designed to review the preparation of a bank reconciliation
and the related journal entries. The solution follows the handout master.
5. Handout 6-5
Use Handout 6-5 for an in-class activity designed to review the preparation of a bank reconciliation
and the related journal entries. The solution follows the handout master.
6. Handout 6-6
Use Handout 6-6 for an in-class activity designed to review the preparation of journal entries relating
to sales (sales, sales discounts, and sales returns and allowances). The solution follows the handout
master.
6-16
Education.
HANDOUT 6 – 1
ACCOUNTS RECEIVABLE JOURNAL ENTRIES
Prepare journal entries to record the following transactions:
(1) On December 15, 2014, the company recorded $150,000 sales on credit.
Dec. 15
Ensure the equation still balances and debits = credits

(2) On December 31, 2014, the company estimated bad debt expenses of $15,000.
Dec. 31

(3) On January 12, 2015, collect $100,000 worth of accounts receivable.
Jan. 12
2015

6-17
Education.
HANDOUT 6 – 1, CONTINUED
(4) After many collection attempts, the Company determined on June 15, 2015 that it would not collect
$10,000 in accounts receivables from Pendant Publishing. It decided to write-off this account.
Jun. 15

(5) On July 16, 2015, Pendant Publishing called to say that they have had financial problems but can
afford to pay $7,000 to settle their $10,000 debt in full. The company agreed to these terms, and reversed
$7,000 of the prior write-off. It received a $7,000 check from Pendant the next day.
Jul. 16
Jul. 16

Post the above entries to the following T-accounts:
+ Accounts Receivable (A) – - Allowance for Doubtful Accounts (xA) +
6-18
Education.
HANDOUT 6 – 1 SOLUTION
ACCOUNTS RECEIVABLE JOURNAL ENTRIES

Prepare journal entries to record the following transactions:
(1) On December 15, 2014, the company recorded $150,000 sales on credit.
Dec. 15 Accounts Receivable (+A) 150,000

Sales (+R, +SE) 150,000

Accounts +150,000 Sales +150,000
Receivable
(2) On December 31, 2014, the company estimated bad debt expenses of $15,000.
Dec. 31 Bad Debt Expense (+E, –SE) 15,000

Allowance for Doubtful Accounts (+xA, –A) 15,000

Allowance –15,000 Bad Debt –15,000
for Expense
Doubtful
Accounts
(3) On January 12, 2015, collect $100,000 worth of accounts receivable.

Jan. 12 Cash (+A) 100,000
2015 Accounts Receivable (–A) 100,000

Cash +100,000
Accounts –100,000
Receivable
6-19
Education.
HANDOUT 6 – 1 SOLUTION, CONTINUED
(4) After many collection attempts, the Company determined on June 15, 2015 that it would not collect
$10,000 in accounts receivables from Pendant Publishing. It decided to write-off this account.
Jun. 15 Allowance for Doubtful Accounts (–xA, +A) 10,000

2015 Accounts Receivable (–A) 10,000

Allowance +10,000
for
Doubtful
Accounts
Accounts –10,000
Receivable
(5) On July 16, 2015, Publishing called to say that they have had financial problems but can afford to pay
$7,000 to settle their $10,000 debt in full. The company agreed to these terms, and reversed $7,000 of the
prior write-off. It received a $7,000 check from Pendant the next day.
Jul. 16 Accounts Receivable (+A) 7,000

Jul. 16 Cash (+A) 7,000

Accounts Receivable (–A) 7,000

Accounts +7,000
Receivable
Allowance –7,000
for
Doubtful
Accounts
Cash +7,000
Accounts –7,000
Receivable
Post the above entries to the following T-accounts:
+ Accounts Receivable (A) – – Allowance for Doubtful Accounts (xA) +

Dec. 15 150,000 15,000 Dec. 31
100,000 Jan. 12 Jun. 15 10,000
10,000 Jun. 15 7,000 Jul. 16
Jul. 16 7,000 7,000 Jul. 16 12,000 End. Bal.
End. Bal. 40,000
6-20
Education.
HANDOUT 6 – 2
ESTIMATION AND RECORDING OF UNCOLLECTIBLE ACCOUNTS –

PERCENTAGE OF CREDIT SALES RECEIVABLE METHOD
Part 1 – During 2015, Vandolay reported $300,000 in sales. The company’s allowance for doubtful
accounts has an unadjusted credit balance of $12,000 at December 31, 2015. Based on prior experience,
management estimates that 2.5% of sales will result in bad debts. Prepare the required adjusting journal
entry.
Dec. 31

+ Bad Debt Expense (E) – - Allowance for Doubtful Accounts (xA) +
Part 2 – Assume instead that the company’s allowance for doubtful accounts has an unadjusted debit
balance of $400. Prepare the required adjusting journal entry.
Dec. 31

6-21
Education.

PERCENTAGE OF CREDIT SALES RECEIVABLE METHOD
accounts has an unadjusted credit balance of $12,000 at December 31, 2015. Based on prior experience,
management estimates that 2.5% of sales will result in bad debts. Prepare the required adjusting journal
entry.


for Expense
Doubtful
Accounts

12,000 Beg. Bal.
Dec. 31 7,500 7,500 Dec. 31
End. Bal. 7,500 19,500 End. Bal.


for Expense
Doubtful
Accounts

Beg. Bal. 400
Dec. 31 7,500 7,500 Dec. 31
End. Bal. 7,500 7,100 End. Bal.
6-22
Education.
HANDOUT 6 – 3

AGING OF ACCOUNTS RECEIVABLE METHOD
accounts has an unadjusted credit balance of $12,000 at December 31, 2015. Vandolay Industries
accountants prepared the following Aging of Accounts Receivable:
Number of days unpaid

Customer Total
0-30 30-60 60-90 Over 90
Alpha Sales $ 700 $ 700
Gamma Manufacturing Co. 11,900 $ 11,900
Delta Shipping Corp. 2,200 $ 2,200
Epsilon Industries 6,000 $ 6,000
Theta Manufacturing 1,800 1,800
Zeta Industries 600 600
Other customers 136,800 88,100 26,900 9,800 12,000
Totals $160,000 $100,000 $30,000 $12,000 $18,000
Vandolay accountants believe that receivables 0-30 days old have a 4% chance of noncollection.
Receivables 30-60 days old have a 10% chance of noncollection. Receivables 60-90 days old have a 20%
chance of noncollection. Receivables over 90 days old have a 40% chance of noncollection. The
company’s allowance for doubtful accounts has an unadjusted credit balance of $12,000. Prepare the
required adjusting journal entry.
Dec. 31

+ Bad Debt Expense (E) – – Allowance for Doubtful Accounts (xA) +
6-23
Education.
HANDOUT 6 – 3, CONTINUED
Dec. 31

6-24
Education.

AGING OF ACCOUNTS RECEIVABLE METHOD
accounts has an unadjusted credit balance of $12,000 at December 31, 2015. Vandolay Industries
accountants prepared the following Aging of Accounts Receivable:
Number of days unpaid

Customer Total
0-30 30-60 60-90 Over 90
Alpha Sales $ 700 $ 700
Gamma Manufacturing Co. 11,900 $ 11,900
Delta Shipping Corp. 2,200 $ 2,200
Epsilon Industries 6,000 $ 6,000
Theta Manufacturing 1,800 1,800
Zeta Industries 600 600
Other customers 136,800 88,100 26,900 9,800 12,000
Totals $160,000 $100,000 $30,000 $12,000 $18,000
x 4% x 10% x 20% x 40%
$ 16,600 $ 4,000 $ 3,000 $ 2,400 $ 7,200
Vandolay accountants believe that receivables 0-30 days old have a 4% chance of noncollection.
Receivables 30-60 days old have a 10% chance of noncollection. Receivables 60-90 days old have a 20%
chance of noncollection. Receivables over 90 days old have a 40% chance of noncollection. The
company’s allowance for doubtful accounts has an unadjusted credit balance of $12,000. Prepare the
required adjusting journal entry.


for Expense
Doubtful
Accounts

12,000 Beg. Bal.
Dec. 31 4,600 4,600 Dec. 31
End. Bal. 4,600 16,600 End. Bal.
6-25
Education.
HANDOUT 6 – 3 SOLUTION, CONTINUED


for Expense
Doubtful
Accounts

Beg. Bal. 400
Dec. 31 17,000 17,000 Dec. 31
End. Bal. 17,000 16,600 End. Bal.
6-26
Education.
HANDOUT 6 – 4
BANK RECONCILIATION
Information from the records and bank statement and of Matrix, Inc. as of July 31, 2014 is set forth below
Cash balance per bank, July 31, 2014 $9,610

Cash balance per general ledger, July 31, 2014 7,430
Outstanding checks at July 31, 2014 2,417
Check mailed to the bank for deposit that had not reached the bank by July 31, 2014 500
NSF check (from a customer for a payment on account) returned by bank 281
July interest earned per bank statement 30
Check no. 781 for supplies expense cleared the bank for $240, but was erroneously
recorded in the books at $268.
Deposit by Acme Company erroneously credited by the bank to our account 486
Part A
Prepare the bank reconciliation for Matrix, Inc.
6-27
Education.
HANDOUT 6 – 4, continued
Part B
Prepare any journal entries that should be made as a result of the bank reconciliation.
Date Accounts Debit Credit
6-28
Education.
BANK RECONCILIATION
Information from the records and bank statement and of Matrix, Inc. as of July 31, 2014 is set forth below
Cash balance per bank, July 31, 2014 $9,610

Cash balance per general ledger, July 31, 2014 7,430
Outstanding checks at July 31, 2014 2,417
Check mailed to the bank for deposit that had not reached the bank by July 31, 2014 500
July interest earned per bank statement 30
Check no. 781 for supplies expense cleared the bank for $240, but was erroneously
recorded in the books at $268.
Deposit by Acme Company erroneously credited by the bank to our account 486
Part A
Prepare the bank reconciliation for Matrix, Inc.
Matrix, Inc.
Bank Reconciliation
July 31, 2014
Bank Statement Books

Ending cash balance per bank statement $9,610 Ending cash balance per books $7,430
Additions: Additions:
Deposit in transit 500 Interest 30
Deductions: Recording error check 781 28
Bank error (486) Deductions:
Outstanding checks (2,417) NSF check (281)
Up-to-date ending cash balance $7,207 Adjusted Balance, July 31 $7,207
Part B

7/31/10 Cash (+A) 30
Interest Revenue (+R, +SE) 30
7/31/10 Cash (+A) 28

Accounts Payable (+L) 28
7/31/10 Accounts Receivable (+A) 281

Cash (–A) 281
6-29
Education.
HANDOUT 6 – 5
BANK RECONCILIATION
Prepare the bank reconciliation for Donna’s Day Care using the following information:
Cash balance per bank, June 30, 2014 $5,586

Cash balance per general ledger, June 30, 2014 5,055
Outstanding checks, June 30, 2014 1,816
Deposit in transit, June30, 2014 750
June interest earned per bank statement 15
Check no. 800 in payment of accounts payable cleared the bank for $1,100, but was
erroneously recorded in the books at $$800.
Deposit in amount of $6,000, recorded properly on books, erroneously credited on bank
statement as $5,800
Part A
Prepare the bank reconciliation for Donna’s Day Care.
6-30
Education.
HANDOUT 6 – 5, continued
Part B
6-31
Education.
BANK RECONCILIATION
Prepare the bank reconciliation for Donna’s Day Care using the following information:
Cash balance per bank, June 30, 2014 $5,586

Cash balance per general ledger, June 30, 2014 5,055
Outstanding checks, June 30, 2014 1,816
Deposit in transit, June30, 2014 750
June interest earned per bank statement 15
Check no. 800 in payment of accounts payable cleared the bank for $1,100, but was
erroneously recorded in the books at $$800.
Deposit in amount of $6,000, recorded properly on books, erroneously credited on bank
statement as $5,800.
Part A
Prepare the bank reconciliation for Donna’s Day Care.
Donna’s Day Care

Bank Reconciliation
June 30, 2014
Bank Statement Books

Ending cash balance per bank statement $5,586 Ending cash balance per books $5,055
Additions: Additions:
Deposit in Transit 750 Interest 15
Deductions: Deductions:
Bank error (200) Recording error check 800 (300)
Outstanding checks (1,816) NSF check (450)
Up-to-date ending cash balance $4,320 Adjusted Balance, July 31 $4,320
Part B

6/30/10 Cash (+A) 15
Interest Revenue (+R, +SE) 15
6/30/10 Accounts Payable (–L) 300

Cash (–A) 300
6/30/10 Accounts Receivable (+A) 450

Cash (–A) 450
6-32
Education.
HANDOUT 6 – 6
SALES JOURNAL ENTRIES
On March 3, 2014, Gooddeal.com sold merchandise for $2,500, terms 2/10 n/30. Prepare the journal
entry.
Debit and credit the accounts affected
Mar. 3

The customer paid for the merchandise on March 6, 2014, taking advantage of the permitted discount.
Prepare the journal entry.
Mar. 6

On March 8, 2014, the customer returned $1,250 (or one-half) of the merchandise that was purchased
back on March 3. Prepare the journal entry.
Mar. 8

6-33
Education.
SALES JOURNAL ENTRIES
On March 3, 2014, Gooddeal.com sold merchandise for $2,500, terms 2/10 n/30. Prepare the journal
entry.

Mar. 3 Accounts Receivable (+A) 2,500
Sales (+R, +SE) 2,500

Acct Rec. +2,500 Sales +2,500
The customer paid for the merchandise on March 6, 2014, taking advantage of the permitted discount.
Prepare the journal entry.

Mar. 6 Cash (+A) [2,500 x 98%] 2,450
Sales Discounts (+xR, –SE) [2,500 x 2%] 50
Accounts Receivable (–A) 2,500

Cash +2,450 Sales Disc. –50
Acct Rec. –2,500
On March 8, the customer returned $1,250 (or one-half) of the merchandise that was purchased back on
March 3. Prepare the journal entry.

Mar. 8 Sales Returns and Allowances (+xR, –SE) 1,250
Cash (–A) [2,500 x 50%] 1,250

Cash –1,250 Sales Returns –1,250
&Allowances
6-34
Education.
Another random document with
no related content on Scribd:
The cuttle-fish blackens the water to escape from his enemies, but
he does not always escape; nay, in blackening the water he betrays
himself to the watchful spectators. My hero failed in his action, and
quitted the court leaving behind him the bubble reputation. If I am
rightly informed, Adversity, that touchstone of lofty minds, found
this grand philosopher as serene as if he had spent his life in
studying Epictetus. He wrapt himself, if not in virtue, at least in his
scorn of it,—
“Et udo
Spernit humi defugiente penno.”
He retired to the classic Tusculum of his villa in St John’s Wood.

There, cheered by the faithful adherence of some elegant
companions, who, if they did not believe him innocent, found him
unalterably agreeable, he sipped his claret and moralised on his
creed. Doubtless he believed that “the talk would soon subside,” “the
thing blow over.” The world would miss him too much not to rally
again round the sage who so justly despised it. Perhaps his belief
might have been realised, but,
“Vita summa brevis spem nos vetat inchoare longam”—
Death, the only player that no man can cheat, cut into his table,
and trumped the last card of his long suit.
In the more brilliant period of this amiable man-scorner’s social
career, once, and once only, he is said to have given way to anger.
One of his associates (I say designedly associates, not friends, out of
respect for his memory, since friendship is a virtue, and he therefore
denied its existence)—one of his associates, warmed perhaps into
literature by his own polite acquaintance with all that is laide in
belles lettres, wrote a comedy. The comedy was acted. My hero
honoured the performance by appearing in the author’s box. Leaning
forward so as to be seen of all men, he joined his hands in well-bred
applause of every abortive joke and grammatical solecism, till, in a
critical part of the play, there occurred a popular claptrap—a
something said in praise of virtue and condemnation of vice. The
gallery of course responded to the claptrap, expressing noisy
satisfaction at the only sentiment familiar to their comprehension
which they had hitherto heard. But my archetype of modern
misanthropy paused aghast, suspended
“The soft collision of applauding gloves,”
and, looking at his associate as reproachfully as Cæsar might have

looked at Brutus when he sighed forth “Et tu, Brute!” let fall these
withering words, “Why, Billy, this is betraying the Good Old Cause.”
So saying, he left the box, resentful. Now, this man I call the genuine,
positive, realistic Misanthrope, compared to whom Timon and
Alceste are poetical make-believes!
SPEDDING’S LIFE OF BACON.[6]
6. ‘The Letters and the Life of Francis Bacon.’ By James Spedding. Vols. I. & II.
Lord Macaulay’s ‘Essay on Francis Bacon.’
Mr Spedding, in the modest form of a commentary on the letters
and occasional writings of Lord Bacon, is now giving us a biography
of that celebrated man, which bids fair, for a long time to come, to be
our highest authority on the subject. To place all the facts before us
on which our judgment of the character of Lord Bacon should be
formed, is his great object; he deals in few assertions of his own; he is
disposed to let facts speak for themselves; he guides our opinion by a
full narrative of the events, and makes few attempts to influence us
by argument or eloquence. A more satisfactory or trustworthy book
has rarely come before us.
We will not say that Mr Spedding’s narrative is never coloured by
an imagination which has received its unconscious prompting from
his admiration of Bacon: one rather amusing instance of this
colouring of the imagination we think we have detected, and shall
have occasion to notice; but no admiring biographer of a great man
has more studiously refrained from thrusting forward his own
opinions or conceptions where the reader is merely desirous of
obtaining a clear insight into the facts themselves. Mr Spedding has
not yet completed his task, but he has given us in these two volumes
more materials of interest than in the space of a single paper we shall
have room to touch upon, and the main topic which occupies them is
fully discussed and finally dismissed.
That topic is the relation between Bacon and Essex. Of the
splendid Essay of Lord Macaulay’s, which is still ringing in the ears
of most English readers, no part was written with more force, or was
more damaging to the character of Bacon, than that which treated of
his conduct to the Earl of Essex. Many who could have forgiven the
peccant Chancellor for being too ready to accept whatever was
offered to him in the shape of present or gratuity, could not pardon
the cold-blooded and faithless friend. Now it is precisely on this
subject that Mr Spedding presents us with materials for forming a
very different judgment from that which the eloquent pages of
Macaulay had betrayed us into. Up to the period when Essex
disappears from the scene, these two volumes give us their clear
guidance. Of that guidance we very gladly avail ourselves.
We would premise that it is not our purpose, or endeavour, to
defend Bacon at all points—to robe our Chancellor in spotless
ermine; neither do we think that the result of renewed investigation
is a clear verdict of “Not Guilty” on all the charges that have been
brought against him. There is much in Macaulay’s estimate both of
the character and the philosophy of Bacon with which we cordially
agree. It happens frequently with great historic names that there is
an oscillation of public opinion; the too harsh verdict of one writer,
or one age, is followed by a verdict as much too lenient. Such
oscillation seems to have lately taken place with regard to Bacon, and
the disposition is at present to find nothing blameworthy in him.
This disposition we do not share. We think that no good is done, but
rather harm, when enthusiasm for the brilliant achievements of any
man, whether in a career of war, or statesmanship, or letters, induces
us to shut our eyes to his moral defects. For in these cases we do not,
and cannot, exactly shut our eyes: we do something worse; we try to
see that vices are not vices. We lower our standard, that we may pass
no unfavourable judgment. It is an ill lesson that teaches us to
forgive the overbearing despotism of a great soldier or great
minister, or the rascality of a great wit; to see no injustice in a
Napoleon, and no villany in a Sheridan. We believe that the censure
of Lord Macaulay is too severe, but it is censure and not praise which
the character of Bacon provokes. We all know that the fervid
eloquence, or rather the ardent temperament, of our more than
English Livy, led him into manifest exaggerations; but in general, we
should say that his drawing is true to nature, except that it had this
too swelling outline. His exaggerations were like those of Michael
Angelo, who drew muscles disproportionately large, but who never
drew a muscle where none existed. A sterling good sense presided
over the verdicts of Macaulay—over the yes or no; but the verdict
once determined, the impassioned orator ran the risk of falsifying it
by the ruthless, unmitigated energy with which it was delivered.
We should not say of Bacon either that he was the “greatest” or the
“meanest” of mankind. But as certainly as he was great in his
intellectual attributes, so certainly was he not great in his moral
character. Here he lacked elevation. He could tolerate artifice, and
dissimulation, and gross flattery. If the crime of Essex justified him,
as we are inclined to think it did, in breaking entirely with that
nobleman, and treating him as an enemy to the State, what are we to
say of the strain of advice which he habitually gives to Essex while
the two are yet in perfect amity? A mere personal ambition, to be
obtained by the petty arts of the courtier, is all that he prompts his
friend to aspire after. Win the Queen—honestly, if possible; but, at all
events, win the Queen! This is the burden of his counsel. Bacon was
great in his intellectual speculations; he was mean in the conduct of
life. The antithesis still remains to us in a modified form. All his life
is a continual suing for place; and what he obtained by flattery and
subservience, he lost by some poor cupidity.
Bacon was a philosopher from his youth, but from his youth to his
old age he was also a lover of social distinctions, and of a sumptuous
mode of life. If he had the desire to take all human knowledge for his
province, and to extend his name and his good influence into future
ages, if he desired to be a reformer even of philosophy itself, he had
also other desires of a much more commonplace description; not evil
in themselves—good perhaps in themselves—but not subordinated to
the high morality which might have been expected from one so wise.
But if in his rise to power he showed too much servility—if, when in
the seat of power, he showed too much cupidity,—surely no one ever
fell from greatness, no one was ever struck down from the seat of
power, for so slight a measure of criminality. No historic personage
can be mentioned amongst us, on whom so severe a punishment, so
deep a disgrace, was inflicted for a fault so little heinous.
The first great error which Bacon committed, the consequence of
which pursued him all his life, was the running into debt. It was a
life-long fault. It was his fault, not his misfortune. He received less,
we know, from his father than he might reasonably have expected,
less than his brothers had received, but no biographer has ventured
to call him poor—so poor that he could not have held his ground as a
student of the law without incurring debt. Whether it was mere
carelessness and imprudence, or a wilful spending “according to his
hopes, not his possessions,” we find him very early in debt; and as
years advance we find the debts, of course, more and more onerous.
No one knew better than Bacon that he who owes has to borrow, and
that he who borrows will have, in some form, to beg, to sue—will be
tempted to sordid actions—will lose his independence, his upright
attitude amongst men. There is no greater slavery than debt. It bred
in Bacon that “itching palm,” and that perpetual suing, which
disgrace his career.
He begins to sue from his very first entry into life. He puts his trust
in the Lord Treasurer. And what is remarkable, the very nature of the
first suit he makes is unknown. It was some office, not of a legal
character, as we should conjecture. Writing to Walsingham about it,
he says that the delay in answering it “hinders me from taking a
course of practice which, by the leave of God, if her Majesty like not
of my suit, I must and will follow: not for any necessity of estate, but
for my credit sake, which I know by living out of action will wear.” At
this date, 25th August 1585, he does not plead absolute inability to
live on his private fortune. Subsequently, when his debts have
increased, he writes upon this subject in a very different strain. He is
embarrassed by usurers; he is arrested; debt comes upon him, as he
says, like an armed man.
Of the earliest years of Bacon few memorials remain. But Mr
Spedding brings together two conspicuous facts. The first is, that
Bacon, at the age of fifteen, conceives his project of a reformation in
philosophy; and the second is, that immediately on leaving college he
accompanies Sir Amias Paulet on his embassy to France. Thus
philosophy and diplomacy, speculation and state-craft, study and the
world, take at once joint possession of Francis Bacon.
Of the first of these facts, and the most important in his life, Mr
Spedding speaks in a passage of much eloquence, glowing and
chastened withal:—
“That the thought first occurred to him during his residence at Cambridge,
therefore before he had completed his fifteenth year, we know upon the best
authority—his own statement to Dr Rawley. I believe it ought to be regarded as the
most important event of his life—the event which had a greater influence than any
other upon his character and future course. From that moment there was
awakened within his breast the appetite which cannot be satiated, and the passion
which cannot commit excess. From that moment he had a vocation which
employed and stimulated all the energies of his mind, gave a value to every vacant
interval of time, an interest and significance to every random thought and casual
accession of knowledge—an object to live for as wide as humanity, as immortal as
the human race—an idea to live in vast and lofty enough to fill the soul for ever
with religious and heroic aspirations. From that moment, though still subject to
interruptions, disappointments, errors, and regrets, he could never be without
either work or hope or consolation.”
But this young philosopher is son of Sir Nicholas Bacon, the late
Lord Chancellor; the Queen has laid her hand upon his head while
yet a boy, and called him her young Lord Keeper; he is nephew to the
Prime Minister; he dreams of courts, of place, of power. He must
unite his lofty speculations with the great affairs of State; he must
survey human knowledge from the high places of society. He enters
Gray’s Inn, is a student of the law, and his heart aches after office
and promotion.
There is one person very intimately connected with Bacon, whom
Mr Spedding has brought before us with a novel distinctness—his
mother, Lady Bacon. We are not aware that her presence will throw
much light on the character of her son, but henceforth, we are sure,
no biography of the son will be written in which this lady will not be
a conspicuous figure. She is one of those strongly-marked characters
that always please the imagination; dogmatic, perverse, full of
maternal anxiety, pious and splenetic, with marvellous shrewd sense
and a very ungovernable temper. The knowledge of her character
would enable us to answer one question. Presuming that any one
should think fit to ask why Bacon did not seek the retirement of
Gorhambury, the answer is quite ready. There would have been no
peace for him under the roof of his lady mother. Puritan and
termagant, his philosophy would have been “suspect” to her; and his
retirement would have been certainly denounced as unpardonable
sloth. She is a learned lady, mingles scraps of Latin and Greek in her
epistles, and she can write, when the occasion demands, in a very
stately English style—stately, but straightforward withal. Her son’s
epistolary style is often involved and verbose. He does not often
come so directly to the point as Lady Bacon does in the following
letter, written to Lord Burghley, in the interest of the Nonconformist
clergy, or Preachers, as they were then called. In a conference which
had lately taken place at Lambeth between them and the bishops, she
thinks they had not fair-play; she appeals, in their name, to her
Majesty and the Council:—
“They would most humbly crave, both of God in heaven, whose cause it is, and of
their Majesty, their most excellent sovereign here on earth, that they might obtain
quiet and convenient audience rather before her Majesty herself, whose heart is in
God his hand to touch and to turn, or before your Honours of the Council, whose
wisdom they greatly reverence; and if they cannot strongly prove before you out of
the word of God that reformation which they so long have called and cried for to be
according to Christ his own ordinance, then to let them be rejected with shame out
of the Church for ever.... And therefore, for such weighty conference they appeal to
her Majesty and her honourable wise Council, whom God has placed in highest
authority for the advancement of His kingdom; and refuse the bishops for judges,
who are parties partial in their own defence, because they seek more worldly
ambition than the glory of Jesus Christ.”
Mr Spedding next introduces to us the same lady under the

agitations, as he says, of maternal anxiety. Anthony Bacon, the elder
brother of Francis, has been long upon the Continent collecting
intelligence, and otherwise amusing or occupying himself. He sends
over one Lawson, a confidential servant, to Lord Burghley with some
important communication. Lawson is a Catholic. That her son
Anthony should be so long in Popish parts is a dire grievance to Lady
Bacon; that he should have in his confidence a Papist servant, is not
to be borne. She prevails upon Burghley to have this Lawson arrested
and retained in England. One snake is, at all events, caught, and shall
be held firm. Anthony writes to his friend, Francis Allen, to obtain
for him the liberation of Lawson. Allen, furnished with a letter from
Lord Burghley (who seems, for his own part, to be willing to release
the man), proceeds to Gorhambury. His intercession with Lady
Bacon he tells himself in a letter to Anthony:—
“Upon my arrival at Godombery my lady used me courteously until such time I

began to move her for Mr Lawson, and, to say the truth, for yourself;—being so
much transported with your abode there that she let not to say that you are a
traitor to God and your country: you have undone her; you seek her death; and
when you have that you seek for, you shall have but a hundred pounds more than
you have now.
“She is resolved to procure her Majesty’s letter to force you to return; and when
that shall be, if her Majesty gave you your right or desert, she should clap you up in
prison....
“I am sorry to write it, considering his deserts and your love towards him; but
the truth will be known at the last, and better late than never: it is vain to look for
Mr Lawson’s return, for these are her ladyship’s own words—‘No, no,’ saith she, ‘I
have learned not to employ ill to good; and if there were no more men in England,
and although you should never come home, he shall never come to you.’
“It is as unpossible to persuade my lady to send him, as for myself to send you
Paul’s steeple....
“When you have received your provision, make your repair home again, lest you
be a means to shorten her days, for she told me the grief of mind received, daily by
your stay will be her end; also saith her jewels be spent for you, and that she
borrowed the last money of seven several persons.
“Thus much I must confess unto you for a conclusion, that I have never seen and
never shall see a wise lady, an honourable woman, a mother more perplexed for
her son’s absence, than I have seen that honourable dame for yours. Therefore lay
your hand on your heart, look not for Mr Lawson; here he hath, as a man may say,
heaven and earth against him and his return.”
Soon after this Anthony does return home, and Lady Bacon
addresses him a letter, in which there are some allusions to Francis,
which will be read with interest:—
“This one chiefest counsel your Christian and natural mother doth give you even
before the Lord, that above all worldly respects you carry yourself ever at your first
coming as one that doth unfeignedly profess the true religion of Christ, and hath
the love of the truth now, by long continuance, fast settled in your heart, and that
with judgment, wisdom, and discretion; and are not afraid or ashamed to testify
the same by hearing and delighting in those religious exercises of the sincerer sort,
be they French or English. In hoc noli adhibere fratrem tuum ad consilium aut
exemplum....
“I trust you, with your servants, use prayer twice in a day, having been where
reformation is. Omit it not for any. It will be your best credit to serve the Lord duly
and reverently, and you will be observed at first now. Your brother is too negligent
herein, but do you well and zealously; it will be looked for of the best-learned sort,
and that is best.”
Full of prudence, full of zeal, suspecting her sons themselves and

every one about them, anxious to manage them on all points,
whether in their diet or their religion, such is Lady Bacon. She is
writing still to Anthony.
“Gratia et salus. That you increase in amending I am glad. God continue it every
way. When you cease of your prescribed diet, you had need, I think, to be very wary
both of your sudden change of quantity and of season of your feeding—especially
suppers late or full. Procure rest in convenient time; it helpeth much to digestion. I
verily think your brother’s weak stomach to digest hath been much caused and
confirmed by untimely going to bed, and then musing nescio quid when he should
sleep, and then, in consequent, by late rising and long lying in bed, whereby his
men are made slothful, and himself continueth sickly. But my sons haste not to
hearken to their mother’s good counsel in time to prevent. The Lord, our heavenly
Father, heal and bless you both as His sons in Christ Jesus. I promise you,
touching your coach, if it be so to your contentation, it was not wisdom to have it
seen or known at the Court; you shall be so much pressed to lend, and your man,
for gain, so ready to agree, that the discommodity thereof will be as much as the
commodity. Let not your men see my letter. I write to you, and not to them.”
And again, a few days later:—
“I am glad, and thank God of your amendment. But my man said he heard you
rose at three of the clock. I thought that was not well, so suddenly from bedding
much to rise so early—newly out of your diet.... I like not your lending your coach
yet to my lord and lady. If you once begin, you shall hardly end. It was not well it
was so soon sent into the Court to make talk, and at last be promised and misliked.
Tell your brother I counsel you to send it no more. What had my Lady Shriefess to
borrow your coach?”
Any comment of ours would only weaken the effect of such graphic
letters as these. We are enabled even to follow our zealous, dogmatic,
yet motherly woman, into her own household. Edward Spencer was a
servant of Anthony’s, but was left for some reason at Gorhambury.
He writes to his master:—
“My humble duty remembered to your good worship. I thought good to write to
you to satisfy you how unquiet my lady is with all her household.” [Then he enters
into a long story how my lady had said of a certain “grænen bitch,” whatever that
may be, that it should be hanged; and how, when Edward Spencer obeys her
command, and hangs the dog, my lady breaks out into a “fransey.”]—“My lady do
not speak to me as yet. I will give none offence to make her angry; but nobody can
please her long together.”
And again—
“My humble duty first remembered to your good worship. I thought good to
write unto you to sartey you of my lady’s great unquietness in the house. Since her
last falling-out with me she showed me a good countenance as ever she did before.
Now, yesterday I had a sparhawk given me, and she killed a brace of partridges,
and then I came home before the evening was shut in; indeed, all the folks had
supped: whereat she seemed to be very sore angry with these words—‘What come
you home now? I would you and your hawk would keep you away altogether. You
have been a-breaking of hedges between neighbour and neighbour, and now you
come home out of order, and show an ill example in my house. Well, you shall keep
no hawk here.’ ‘I am the more sorrier I have given no acause that your ladyship
should be offended, nor I will not. To please your ladyship I will pull off her head.’
Whereat she stamped and said, I would do by her as I did by the bitch. Insomuch
she would let me have no supper. So truly I went to bed without my supper. There
is not one man in the house but she fall out withal, and is not in charity one day in
a week but with priests, which will undo her. There is one Page that had six pounds
on her. Mr Willcocks had a paper with a great deal of gold in it. Wellblod had two
quarterns of wheat. Dicke had something the other day; what, I know not.”
There is more of the same kind; though whether it is quite fair to

take the testimony of this Edward Spencer without hearing what
Lady Bacon could report of him, is worth a thought. He must have
been a surly fellow, from his offering so readily to pull off the hawk’s
head. Our next quotation brings us back to Francis, and the unhappy
subject of his debts: we have hints, too, of the influence under which
she suspects these debts to be incurred, which the modern
biographer is unable to follow out; and which, from the different
manners of a former age, it is difficult entirely to understand. But we
are confirmed by these extracts in our previous convictions, that the
loss which Francis is said to have sustained by the sudden death of
his father (who thus failed to make the full provision for him he
intended) cannot be represented as the real cause of his
embarrassments. Mr Spedding represents this fact “as perplexing the
problem of his life with a new and inconvenient addition.” But it
could not have materially perplexed the problem of his life, unless it
disabled him from living upon his private fortune. It made him a
poorer gentleman; but if he had been a richer, he would still have
been a suitor at the Court, and still, in all probability, have incurred
debts. He and Anthony live together, and we find them alternately
assisting each other. There is no evidence of a great disparity in their
fortunes. What share Francis had in the “coach” we know not, but we
hear of him purchasing horses; and certainly the mother does not
look upon the embarrassments of Francis as some inevitable
consequence of his position. She is applied to, in the present case, to
assist him in the payment of his debts, by joining in the sale of an
estate which belongs to him, but in which she has some legal right.
Anthony makes the request, and receives the following reply:—
“For your brotherly care of your brother Francis’s estate you are to be well liked,
and so I do as a Christian mother that loveth you both as the children of God; but,
as I wrote but in a few words yesterday by my neighbour, the state of you both doth
much disquiet me, as in Greek words I signified shortly.
“I have been too ready for you both till nothing is left. And surely, though I pity
your brother, yet so long as he pitieth not himself, but keepeth that bloody Percy,
as I told him then, yea as a coach-companion and bed-companion,—a proud,
profane, costly fellow, whose being about him I verily fear the Lord God doth
mislike, and doth less bless your brother in credit and otherwise in his health,—
surely I am utterly discouraged, and make a conscience further to undo myself to
maintain such wretches as he is. This Jones (?) never loved your brother, indeed,
but for his own credit, being upon your brother, and thankless, though bragging.
But your brother will be blind to his own hurt.... It is most certain till first Enney
(?), a filthy, wasteful knave, and his Welshman, one after another—for take one,
and they will still swarm ill-favouredly—did so lead him, as in a train; he was a
towardly young gentleman, and a son of much good hope in goodliness. But seeing
that he hath nourished most sinful proud villains wilfully, I know not what other
answer to make.”
Then, partly relenting, she adds in a postscript:—
“If your brother desire a release to Mr Harvey, let him so require it himself, and
but upon this condition, by his own hand and bond, I will not; that is, that he make
and give me a true note of all his debts, and leave to me the whole order and
receipt of all his money for his land, to Harvey, and the just payment of all his
debts thereby. And, by the mercy and grace of God, it shall be performed by me to
his quiet discharge, without cumbering him, and to his credit. For I will not have
his cormorant seducers, and instruments of Satan to him, committing foul sin by
his countenance to the displeasing of God and his godly true fear. Otherwise I will
not, pro certo.”
This was a condition which, as Mr Spedding observes, was hard of

digestion for an expectant Attorney-General. It was not complied
with. But we need not attempt to follow these obscure transactions
further; and here we may part company with Lady Bacon. In justice
to her let it be added that, if she scolded her son Francis, she could
assert his claims boldly before others. In a reported conversation
with Sir Robert Cecil she does not scruple to hint that he is but ill
used by his powerful relatives. She little understands what manner of
son she has; she says truly that he is thinking nescio quid, but she is
not without a certain degree of motherly pride, as well as motherly
tenderness, for him.
We must now turn to that portion of Bacon’s history in which we
see him brought into relationship with Essex. Mr Spedding has
represented the friendship of the two men as being based on very
noble motives. Essex was no doubt attracted to Bacon, in the first
instance, by a generous admiration for his talents. But we do not find
that on Bacon’s side there was any reciprocal ardour. We cannot help
thinking that what Bacon chiefly saw in Essex was the young
nobleman likely to be the great favourite of Elizabeth. Bacon, we are
told by Mr Spedding, saw in Essex a man capable of “entering
heartily into all his largest speculations for the good of the world, and
placed by accident in a position to realise, or help to realise them. It
was natural to hope that he could do it.”—(Vol. i. p. 106.) We have a
portrait of Essex, as he first appeared to Bacon, drawn in glowing
colours. This young nobleman is not only described as being (what
all have admitted) generous, brave, and ardent in his friendship, but
credit is given him for wide contemplative ends, or, at least, an
aptitude is presumed in him for purely patriotic or philanthropic
purposes. Now, from the commencement to the termination of his
career, all his good qualities are seen in the service of a mere flagrant
personal ambition. He is jealous of every honour bestowed upon
another: he must be first in the country. And so far from detecting
any great plan or noble intention in the use of power, we see him,
still at an early age, prepared to throw the whole nation into
confusion in order to obtain place or power for himself. And as to
Bacon, throughout the whole of his correspondence with Essex there
are no traces of anything higher than prudential and sometimes
crafty counsels, how best to obtain favour and advancement at Court.
The relationship between them is chiefly this, that Essex is to obtain
office and promotion for Bacon, and Bacon by his aid and advice is to
administer to the greatness of Essex. The relationship has nothing in
it peculiarly reprehensible, but nothing certainly of an elevating
character. Sometimes the strain of advice which the philosopher
gives is of a quite ignoble character, counselling, as it does, a tricky,
dissimulating conduct. It is no Utopia of any kind, moral or
scientific, that he has in view for Essex, or for himself as connected
with Essex. It is how to rise at Court that he studies for his friend,
and it is the petty arts of the courtier that he sometimes condescends
to teach.
We will content ourselves with one quotation: it must be a rather
long one, because a single sentence wrung from its context may give
no fair impression of the general strain of a letter of advice. The
following was written to Essex soon after his famous expedition to
Cadiz:—
“I said to your Lordship last time, Martha, Martha, attendis ad plurima, unum
sufficit; win the Queen: if this be not the beginning, of any other course I see no
end....
“For the removing the impression of your nature to be opiniastre, and not
rulable: First, and above all things, I wish that all matters past, which cannot be
revoked, your Lordship would turn altogether upon insatisfaction, and not upon
your nature or proper disposition. This string you cannot upon every apt occasion
harp upon too much. Next, whereas I have noted you to fly and avoid (in some
respect justly) the resemblance or imitation of my Lord of Leicester and my Lord
Chancellor Hatton; yet I am persuaded (howsoever I wish your Lordship as distant
as you are from them in points of favour, integrity, magnanimity, and merit) that it
will do you much good, between the Queen and you, to allege them (as oft as you
find occasion) for authors and patterns. For I do not know a readier mean to make
her Majesty think you are in your right way. Thirdly, when at any time your
Lordship upon occasion happen in speeches to do her Majesty right (for there is no
such matter as flattery amongst you all), I fear you handle it magis in speciem
adornatis verbis quam ut sentire videaris, so that a man may read formality in
your countenance; whereas your Lordship should do it familiarly et oratione fidâ.
Fourthly, your Lordship should never be without some particulars of art, which
you should seem to pursue with earnestness and affection, and then let them fall
upon taking knowledge of her Majesty’s opposition and dislike. Of which the
weightiest sort may be, if your Lordship offers to labour in the behalf of some that
you favour for some of the places that are void, choosing such a subject as you
think her Majesty is likely to oppose unto. And if you will say that this is
conjunctum cum alienâ injurâ, I will not answer, Hæc non aliter constabunt; but I
say commendation from so good a mouth doth not hurt a man, though you prevail
not. A less weighty sort of particulars may be the pretence of some journeys, which
at her Majesty’s request your Lordship mought relinquish; or if you would pretend
a journey to see your living and estate towards Wales, or the like; for as for great
foreign journeys of employment and service, it standeth not with your gravity to
play or stratagem with them. And the lightest sort of particulars, which yet are not
to be neglected, are in your habits, apparel, wearings, gestures, and the like....
“The third impression is of a popular reputation; which, because it is a thing
good in itself, being obtained as your Lordship obtaineth it, that is bonis artibus;
and besides well governed, is one of the best flowers of your greatness, both
present and to come; it would be handled tenderly. The only way is to quench it
verbis, but not rebus. And, therefore, to take all occasions to the Queen to speak
against popularity and popular courses vehemently, and to tax it on all others;
but nevertheless to go in your honourable commonwealth courses as you do. And,
therefore, I will not advise you to cure this by dealing in monopolies or any
oppressions. Only, if in Parliament your Lordship be forward for treasure in
respect of the wars, it becometh your person well; and if her Majesty object
popularity to you at any time, I would say to her, A Parliament will show that; and
so feed her with expectation.”
It is only the fear of being tedious that prevents us from giving

other passages in which Bacon counsels dissimulation and these
petty artifices of the courtier. We do not say that passages like this
deserve any violent reprobation, but we do say that the writer of
them must have a very lax morality on the subject of truth-speaking;
he must be deficient in self-respect, in moral dignity. Such a
counsellor would not improve the man who followed his advice,
however he might improve his fortunes. There was a love of
manœuvring, of petty diplomacy, in Bacon. In one place we find him
framing two fictitious letters, the one pretending to be written by his
brother Anthony, and the other by the Earl of Essex. This fictitious
correspondence was to be shown to the Queen.—(Vol. ii. p. 197.)
In Bacon, we may observe, we have not the mere ordinary contrast
between good teaching and bad practice. We have not a Seneca
professing a stoical morality and writing apologies for Nero (or any
instance of this kind which the reader may choose for himself, for
Seneca may have his defenders, and many are disposed at present to
say a good word in favour of Nero). It is not a contrast of this kind we
have chiefly to remark in Bacon: what we notice is a defect in the
cultivation of the moral sentiments. The force of his intellect had
gone out in another direction. He had great aspirations for the good
of mankind; but these aspirations were connected with his theory of
knowledge, and they were aspirations after increased power, and
“commodity,” and the physical wellbeing of man. It was not his habit
to dwell much upon those moral sentiments which make, in all ages,
the elevation of the individual mind.
But the grave and specific charge brought against Bacon is that of
ingratitude to his friend. We have to ask what was the amount or
kind of obligation under which Bacon had been placed? What was
the friendship he was supposed to have sacrificed to his interest?
And whether the criminal conduct of Essex did not manumit him
from all the bonds of friendship, whatever they might have been?
Though not always a high-minded counsellor, Bacon was the last
man in the country to tolerate an open act of rebellion against the
Queen and the established Government. The evidence, as laid before
us by Mr Spedding, proves beyond a doubt the grave criminality of
Essex. If we have a friend who passes with us as an honest man, and
he suddenly proves a villain, we generally fling our friendship to the
winds—we disclaim and renounce the man who, in addition to his
other villanies, has practised a treachery upon ourselves. In fact, the
condemnation of Essex may be said to be here the acquittal of Bacon.
We shall not haggle about the amount of specific service rendered
by Essex to his friend. Every generous mind feels gratitude according
to the generosity of purpose of the donor. Essex, in the ardour of his
youth, was, as we have said, drawn towards Bacon by admiration of
his great intellect, and was only too zealous to promote his interest.
His zeal outran his discretion. Nothing came of it but
disappointment to both parties. But this would not have
extinguished a grateful feeling.
We have no ground whatever for supposing that the intercession of
Essex really prevented Bacon from obtaining first the Attorney-
Generalship, and, subsequently, the Solicitor-Generalship. That
nobleman speaks of his solicitations doing more harm than good; but
an expression of this kind was either a generous depreciation of his
own services, or the result of a moody anger against the Queen whom
he had failed to move. It does not seem that Bacon at this time had
any chance at Court. The Queen was in no hurry to promote him. He
had obtained no practice at the bar, and it is no want of charity to
attribute this in Bacon to an unwillingness to spend his strength and
powers on the ordinary routine of legal business. But this
unwillingness must have operated against him. The very qualities for
which we now admire Bacon must have disparaged him as a man of
business in the eyes of Queen Elizabeth and Lord Burghley. A man
who has long ago left his college, and who is still dreaming about
reforms in philosophy, and who tells the Lord Treasurer himself that
“he has as vast contemplative ends as he has moderate civil ends,”
does not seem exactly the person for an Attorney-General. Bacon, at
all events, does not scruple, on a subsequent occasion, to have
recourse again to his friend’s intercession. When Egerton became
Lord Keeper, Bacon wished to succeed him as Master of the Rolls,
and he requests Essex to write to Egerton in his favour. He makes
this request (we may observe in passing) in a diplomatic manner; he
writing half the matter in his own letter, and Anthony being more
explicit in a letter he sends at the same time. It is impossible not to
remark that Bacon is grasping at the higher prizes of the profession
before he has endured the heat and burden of a lawyer’s life.
His friend Essex being unable to procure for him either the
Attorney-Generalship or the Solicitor-Generalship, and feeling
indebted for many services, gave him a small estate, worth, we are
told, £1800 in the currency of these times. This was a gift which, in
one sense of the word, Bacon may be said to have earned; but, if we
may judge according to the present state of feeling on these matters,
it was a gift which he could not have felt perfectly satisfied in
accepting. Nothing but his debts, we venture to assert, persuaded
him to accept it. The services he had rendered were not such as are
paid by money—they were never rendered for money-payment. It
would be a very coarse interpretation (and one which Mr Spedding
has avoided) to call this gift a fee for advice and assistance tendered
to the Earl. It was not professional advice that he gave, whether he
taught him how to rise at Court, or assisted him in the duties of a
privy councillor. There was an interchange of good offices between
the two men; but Bacon sinks from his rightful equality if he accepts
money as an equivalent for any balance of such good offices as might
be in his favour. Mr Spedding suggests that the aid which Bacon
rendered in certain masques or devices got up for the entertainment
of the Queen must be included in the list of his services; but Mr
Spedding would not certainly have counselled him to hold out his
hand for a money-payment for what was doubtless entered into in
the spirit of a literary amusement. If, indeed, the two speeches which
are given us here on Knowledge and in Praise of the Queen were
really delivered at these devices, Bacon must have made these
entertainments subservient to certain graver purposes of his own.
We should like to know if the audience felt thankful to the author for
his eloquent but very long orations.
So stands the account against Bacon, and the two men are still
friends, when one of them suddenly appears in the new character of
traitor and rebel. We say suddenly, for, though Essex had been long
plotting some surprise upon the Government—some insurrectionary
movement—some advantage to be taken either of his military power
or his popularity with the mob—yet he had so far learnt one lesson of
his friend, the lesson of dissimulation, that he had been able to
conceal from him these secret purposes. Even so far back as when he
was organising his great expedition to Ireland, which was to crush
the rebellion of Tyrone, he is suspected of some intention of using
the forces that were put under his command against the Queen’s
Government. We are certainly driven to this alternative: either the
Earl on that expedition manifested such incapacity as is unparalleled
even in those days of brave knights and incompetent generals; or he
acted throughout in the spirit of a traitor. He has the command of an
army, large for those days, of 16,000 men; he does absolutely
nothing with it—fritters it away; comes up at length to Tyrone with
some 4000 men, Tyrone greatly outnumbering him. He draws up his
forces on a hill; Tyrone refuses to charge uphill, but invites Essex to a
parley. Essex accepts the invitation; has half an hour’s talk with the
rebel, who gives him verbally the terms on which he is willing to lay
down his arms—terms which are those of a conqueror. Essex
promises to carry these terms to the Queen, concludes a truce, and
there the campaign ends. The sum total, as Mr Spedding says, would
stand thus:—Expended, £300,000 and ten or twelve thousand men;
Received a suspension of hostilities for six weeks, with promise of a
fortnight’s notice before recommencing them, and a verbal
communication of the conditions on which he was willing to make
peace.
Essex hastens back to England to make his own peace with the
Queen. She at first receives him amicably; but reasons of State
overweigh her personal amity; some inquiry must be made into the
disastrous expedition; he is commanded to keep his own chamber.
This takes place at Nonsuch.
At this juncture Bacon writes the following letter. It proves, as Mr
Spedding observes, that Bacon could have had no suspicion of any
treasonable scheme on the part of Essex; but we cannot help
remarking the tone of hollowness in the letter, and especially in that
congratulatory sentence, which cannot fail to strike the reader. He
knew enough of the expedition to Ireland to know that, from
whatever cause, it was an utter failure.
“My Lord,—Conceiving that your Lordship comes now up in the person of a good
servant to serve your sovereign mistress, which kind of compliments we many
times instar magnorum meritorum, and therefore it would be hard for me to find
you, I have committed to this poor paper the humble salutations of him that is
more yours than any man’s, and more yours than any man. To these salutations I
add a due and joyful gratulation, confessing that your Lordship in your last
conference with me, before your journey, spake not in vain, God making it good,
that you trusted we should say Quis putasset, which, as it is found true in a happy
sense, or I wish you do not find another Quis putasset in the manner of taking this
so great a service. But I hope it is, as he said, Nubecula est, cito transibit: and that
your Lordship’s wisdom and obsequious circumspection and patience will turn all
to the best. So referring all to some time that I may attend you, I commit you to
God’s best preservations.”
We do not believe that Bacon was capable of an ardent friendship

for any one; he was urbane and courteous to all, as is the manner
with men of thought and equanimity. With regard to Essex, this
letter alone would be sufficient proof to us that he had all along been
more of the courtier than the friend. No friend, in these
circumstances, could have written in this hollow strain of
congratulation.
In a short time, however, this strain alters. Essex is examined
before the Council, and is committed to the custody of the Lord
Keeper. He remains in privacy at York House. The nubecula is
growing into a very dark cloud. Bacon, in his interviews with the
Queen, does all that a cautious man can do to bring about a
reconciliation. But if a reconciliation is impossible, he must serve his
sovereign, and not Essex. He now writes thus:—
“My Lord,—No man can better expound my doings than your Lordship, which
maketh me need to say the less. Only I humbly pray you to believe that I aspire to
the conscience and commendation first of bonus civis, which with us is a good and
true servant to the Queen; and next of bonus vir, that is an honest man. I desire
your Lordship also to think that although I confess I love some things much better
than I love your Lordship, as the Queen’s service, her quiet and contentment, her
honour, her favour, the good of my country, and the like, yet I love few persons
better than yourself, both for gratitude’s sake and your own virtues, which cannot
hurt but by accident and abuse. Of which my good affections I was ever and am
ready to yield testimony by any good offices, but with such reservations as yourself
cannot but allow; for as I was ever sorry that your Lordship should fly with waxen
wings, doubting Icarus’s fortune, so for the growing up of your own feathers,
specially ostrich’s, or any other save of a bird of prey, no man shall be more glad.”
To which letter Essex returned a dignified answer, such as a man

might have written who intended to retire from an unjust world into
contemplative life.
Soon after this correspondence Essex was released from even the
gentle confinement in which he had been held. He could have
retired, with none to molest him, into contemplative life. His private
fortune was untouched; his name was still popular with the
multitude. Perhaps, after a short interval of retirement patiently
endured, he might have returned to Court, and have been reinstated
in all his honour and offices.
The truth was that he had been for some time past tampering with
treason of the boldest and most criminal description. Before leaving
Ireland he held a consultation with his friends Blount and
Southampton, and told them “that he found it necessary for him to
go to England, and thought it fit to carry with him as much of the
army as he could conveniently transport, to go on shore with him to
Wales, and there to make good his landing till he could send for
more; not doubting but his army would so increase in a small time
that he should be able to march to London and make his conditions

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Learning Objectives and Related Assignment Materials

Mini- Alternate Cases and

Learning Objectives PowerPoint® Slides

Related Video Programs

McGraw-Hill/Irwin Financial Accounting Video Series

Summary of Related Video Programs, continued

Program #8 – Internal Control and Cash (10:09)

Chapter Take-Aways, continued

Finding Financial Information

STATEMENT OF CASH FLOWS NOTES

Chapter Outline Teaching Notes

F. Reporting Net Sales

3. Allowance method – bases bad debt expense on an

5. This journal entry did not:

2. Percentage of Credit Sales Method

LO 5 – Report, control, and safeguard cash.

ii. Require separate approval of the purchases and the

ii. Deposits in transit – Deposits sent to the bank by

V. Chapter Supplement: Recording Discounts and Returns

Supplemental Enrichment Activities

Note: These activities would be suitable for individual or group activities.

ACCOUNTS RECEIVABLE JOURNAL ENTRIES

Prepare journal entries to record the following transactions:

Ensure the equation still balances and debits = credits

Ensure the equation still balances and debits = credits

(3) On January 12, 2015, collect $100,000 worth of accounts receivable.

Ensure the equation still balances and debits = credits

Ensure the equation still balances and debits = credits

Ensure the equation still balances and debits = credits

Post the above entries to the following T-accounts:

+ Accounts Receivable (A) – - Allowance for Doubtful Accounts (xA) +

ACCOUNTS RECEIVABLE JOURNAL ENTRIES

Dec. 15 Accounts Receivable (+A) 150,000

Ensure the equation still balances and debits = credits

Dec. 31 Bad Debt Expense (+E, –SE) 15,000

Ensure the equation still balances and debits = credits

(3) On January 12, 2015, collect $100,000 worth of accounts receivable.

Ensure the equation still balances and debits = credits

HANDOUT 6 – 1 SOLUTION, CONTINUED

Jun. 15 Allowance for Doubtful Accounts (–xA, +A) 10,000

Ensure the equation still balances and debits = credits

Jul. 16 Accounts Receivable (+A) 7,000

Jul. 16 Cash (+A) 7,000

Ensure the equation still balances and debits = credits

Post the above entries to the following T-accounts:

+ Accounts Receivable (A) – – Allowance for Doubtful Accounts (xA) +

ESTIMATION AND RECORDING OF UNCOLLECTIBLE ACCOUNTS –

Ensure the equation still balances and debits = credits

+ Bad Debt Expense (E) – - Allowance for Doubtful Accounts (xA) +

Ensure the equation still balances and debits = credits

+ Bad Debt Expense (E) – - Allowance for Doubtful Accounts (xA) +

ESTIMATION AND RECORDING OF UNCOLLECTIBLE ACCOUNTS –

Dec. 31 Bad Debt Expense (+E, –SE) 7,500