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Copyright 2020 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
 CONTENTS vii

5 Presentation of financial position 6.4 The profit or loss statement 154

and the worksheet 104 6.5 Balance sheet and profit or loss
Learning objectives 104 statement 156
Introduction 105 6.6 Statement of profit or loss and other
5.1 Business activities and the worksheet 105 comprehensive income 157
Common errors in recording of transactions 107 6.7 Factors affecting the format of the
5.2 Definition and purpose of the profit or loss statement 159
balance sheet 108 Types of business 160
The purpose of the balance sheet 110 Users of accounts 160
5.3 Elements of the balance sheet 110 6.8 Earnings (or profit) management 160
Assets 110 6.9 The statement of changes in equity 161
Categories of assets 112 6.10 The worksheet 163
5.4 Liabilities 113 Study tools 169
Current liabilities 114 7 Presentation of cash flows 184
Non-current liabilities 114 Learning objectives 184
Assets and liabilities 115 Introduction 185
5.5 Owners’ equity 115 7.1 Cash and cash equivalents 185
5.6 The balance sheet equation 118 7.2 Internal control of cash 186
A simple balance sheet 118 7.3 The statement of cash flows 187
5.7 Some balance sheet ratios 122 Purpose 187
5.8 Influences on the format of the 7.4 What does a statement of cash
balance sheet 124 flows show? 187
Types of business 124 7.5 Cash flow from operating activities 189
Users of accounts 127 7.6 Cash flow from investing activities 197
Limitations of the balance sheet 127 Cash flow from financing activities 198
Format used in the book 128 Increase or decrease in cash in the period 198
Study tools 129 Interest, dividends and income tax 198
6 Presentation of financial performance Non-cash investing and financing activities 199
and the worksheet 142 Study tools 200
Learning objectives 142 8 Accounting for selected assets 212
Introduction 143 Learning objectives 212
6.1 Financial performance measurement 143 Introduction 213
6.2 Income and revenue 145 8.1 Accounts receivable 213
Increases in assets 145 Bad and doubtful debts 214
Decreases in liabilities 147 8.2 Accounting policies for bad and
Excluding contributions by owners 147 doubtful debts and implications for users 217
Revenue recognition 147 8.3 Inventory 218
Examples of revenue recognition 148 Valuing inventory 219
6.3 Expenses 150 8.4 Establishing the cost of inventories 221
Reductions in assets 150 AASB 102 Inventories 221
Increases in liabilities 150 Effects of price changes 222
Excluding distributions to owners 151 8.5 Accounting policies for inventories and
The recognition principle 151 implications for users 224
Examples of expenses 151 8.6 Property, plant and equipment, and
depreciation 225

Copyright 2020 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
viii CONTENTS

8.7 Methods of depreciation 225 10.4 Techniques of analysis 290

Why depreciate? 225 Comparison of financial statements over time 290
The straight-line method 229 Trend analysis 290
The reducing-balance method 230 10.5 Ratio analysis 297
Units-of-production method 232 Benchmarks 302
8.8 Accounting policies for depreciation and Profitability ratios 303
implications for users 233 Efficiency ratios 305
8.9 Intangible assets 233 Short-term solvency ratios 306
The cost of intangible assets 234 Long-term solvency ratios 309
Research and development 234 10.6 Market-based ratios 310
Patents 234 10.7 Key limitations of financial statement
Copyright 235 analysis 313
Trademarks or brand names 235 Information problems 313
Franchises 235 Comparison problems over time 313
8.10 Accounting for intangible assets 235 Comparison problems between entities 313
Study tools 237 Study tools 314
9 Accounting for selected liabilities and 11 From the worksheet to debits
sources of financing 250 and credits 334
Learning objectives 250 Learning objectives 334
Introduction 251 Introduction 335
9.1 Accounts payable, provisions 11.1 The traditional approach 335
and accruals 251 11.2 Ledgers, journals and a trial balance 339
9.2 Taxation 254 Ledgers 339
Temporary differences 254 The journal 340
9.3 Sources of finance 256 11.3 End-of-period adjustments 341
Short-term finance 256 Comparison with the worksheet approach 343
Medium-term finance 259 11.4 Final accounts 343
Long-term finance 263 11.5 Computerised accounting systems 345
9.4 Equity finance 264 Study tools 346
Sole proprietorships 264
Partnerships 264 Part 2 Strategic management accounting 356
Limited companies 265
9.5 Classification as equity or debt 266 12 Introduction to strategic management
9.6 Financing structures and financial risk 267 accounting 358
Study tools 270 Learning objectives 358
Introduction 359
10 Analysis of financial statements 278
12.1 Managerial decision making and
Learning objectives 278
accounting information 359
Introduction 279
12.2 External stakeholders and access to
10.1 Users’ information needs 279
management and other accounting
The investor group 279
information 362
Lenders 280
12.3 The organisation as a value chain 363
Employees 281
The industry value chain 365
Analysts 281
Information technology and the value chain 366
Auditors 281
12.4 Strategic management 367
Management 281
Strategy choice 368
Common information needs 281
Strategy implementation 370
10.2 Projections and predictions 283
12.5 Strategic management and
10.3 The common needs explained 285
management accounting information 373

Copyright 2020 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
 CONTENTS ix

12.6 Factors influencing the form and types of 14.2 Cost behaviours 420
management accounting information 374 Linear cost functions 421
Organisational size as a determinant of The relevant range of activity 421
management accounting system design 374 The choice of the independent variable 423
Organisational structure as a determinant of Variable costs 424
management accounting system design 375 Fixed costs 425
Technology as a determinant of management Cost behaviour: assumptions
accounting system design 375 and limitations 425
Environmental factors as a determinant of Estimating costs 426
management accounting system design 376 14.3 The cost assignment process 429
Management accounting information Direct and indirect manufacturing costs 430
and other organisational settings 376 Costing systems and the implication for costs 431
12.7 Accounting information systems and Product and period costs 433
organisational control: a behavioural Past and future manufacturing costs 434
perspective 377 14.4 Traditional volume based costing
Study tools 379 systems and accounting for overhead 436
13 Performance measurement and Costing methods: absorption and variable
evaluation frameworks 386 costing 437
Learning objectives 386 Absorbing overheads 438
Introduction 387 Traditional volume-based costing systems 438
13.1 Organisational goals and performance Predetermined overhead absorption rates 442
measurement 387 14.5 Activity-based costing systems 444
Performance measurement 388 14.6 Presenting cost information for
13.2 What is a performance measure and what management purposes:
properties should it have? 388 manufacturing statements 451
The strategic nature of performance measures 389 Variable costing versus
13.3 Organisational structure and performance absorption costing 453
measurement systems 390 Study tools 455
Executive remuneration and business 15 Budgeting and performance
performance 392 reporting 466
13.4 The use of financial measures to assess Learning objectives 466
organisational performance 393 Introduction 467
Investment centres and financial performance 15.1 The purpose of budgets 467
measures 394 Encourage planning 467
13.5 Non-financial measures: an alternative Coordinate functions within an organisation 467
view of organisational performance 400 A form of communication 467
13.6 The BSC: a comprehensive performance Provide a basis for responsibility accounting 468
management framework 402 Provide a basis for a control mechanism 468
Evaluating organisational performance with a Authorise expenditure 468
balanced scorecard 402 Motivate employees 468
Integrated reporting and the balanced 15.2 The budget process 469
scorecard 406 The budget period 472
Study tools 409 15.3 Preparation of the master budget 472
14 Costs and cost behaviour 418 15.4 Sales and production budgets 479
Learning objectives 418 15.5 Budgeting for overhead expenditure 490
Introduction 419 Study tools 491
14.1 Management’s need for information
about costs 420

Copyright 2020 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
x CONTENTS

16 Cost-volume-profit analysis 502 17.8 Qualitative factors 549

Learning objectives 502 Customers 550
Introduction 503 Employees 550
16.1 CVP analysis 503 Competitors 550
Break-even: the general principles Legal constraints 550
of CVP analysis 504 Suppliers 550
The underlying assumptions of CVP analysis 504 Study tools 551
16.2 The contribution margin method 505 18 Capital investment decisions 564
The contribution margin ratio 506 Learning objectives 564
16.3 The margin of safety 507 Introduction 565
16.4 Break-even analysis: models and charts 508 18.1 The strategic importance of capital
The total revenue formula 508 investment decisions 565
The total cost formula 509 18.2 Capital investments and life-cycle issues 567
The total profit formula 509 18.3 The capital investment decision-making
The total contribution formula 509 process 569
What happens at the BEP? 509 18.4 Capital investment: an accrual-
The break-even chart 511 based decision tool 570
16.5 Limitations of CVP analysis 518 Accounting rate of return (ARR) 570
Study tools 519 18.5 Capital investment: Cash-based
17 Accounting for decision making: with decision tools 576
and without resource constraints 530 Payback period 576
Learning objectives 530 Discounted cash-flow techniques 579
Introduction 531 Net present value (NPV) 580
Decisions where there are no resource Internal rate of return (IRR) 586
constraints 531 Comparison of NPV and IRR 589
Decisions where there are resource constraints 531 18.6 Qualitative factors and capital
Mutually exclusive decisions 531 investment decisions 590
17.1 Costs and benefits relevant to decision 18.7 Post-implementation audit 591
making 532 Study tools 593
Future and sunk (past) costs 532 Appendices
Differential (incremental) costs 533 1 Extracts from Woolworths Ltd 2018
Avoidable and unavoidable costs 533 Annual Report 601
Opportunity costs 535 2 Present and future value factor tables 621
Replacement costs 536 Table 1: Future value of $1 621
Comparison with traditional costing methods 537 Table 2: Present value of $1 623
17.2 Costs and benefits relevant to specific Table 3: Future value of $1 per period 625
decisions 539 Table 4: Present value of $1 per period 627
The meaning of relevance 539
Glossary 629
17.3 Fixed and variable costs and the
contribution approach 540 References 641
The range of products 540 Index 643
17.4 Closing an unprofitable section: the
contribution margin approach 541
17.5 Decision making with constraints 543
17.6 The contribution approach with
one scarce resource 543
17.7 Make or buy decisions 546
Where there is spare capacity 547
Where there is no spare capacity 548

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 xi

Preface
Contemporary Accounting, 10th edition, provides an introduction to accounting for students at universities and other higher
education institutions. With the nature and extent of topic coverage, the text meets the needs of students completing a
first course in accounting. Thus, the text is well suited to fulfilling the requirements of a one-semester unit in accounting for
students enrolled in undergraduate accounting and non-accounting majors or MBA or equivalent post graduate qualifications.
The book provides an excellent overview of the accounting function in business for non-accounting majors, and the approach
taken to financial accounting provides a solid foundation on which accounting majors can better understand the bookkeeping
function. Extensive online materials have been prepared to accompany the 10th edition and are available for instructors and
students who want more material on double-entry bookkeeping to support the concepts covered in the book. Where relevant,
the implications of different accounting policy choices for managers and other external decision makers are discussed.
The objective of this textbook is to convey an understanding of accounting without introducing unnecessary technical
terminology and procedures. Building on basic concepts, it provides a clear understanding of financial statements, their uses
and limitations. Accounting terms and concepts are defined in accordance with official pronouncements. As Australia has
adopted International Financial Reporting Standards (IFRS) for use by all reporting entities in the private and public sectors,
the conceptual basis of Contemporary Accounting relies on the IFRS and relevant pronouncements on the framework issued by
the International Accounting Standards Board (IASB). Where required, these concepts and regulatory requirements are used
to analyse various issues in accounting.
Where appropriate, extracts from annual reports are provided to illustrate contemporary accounting practices. Also
included are extracts from the 2018 Woolworths Limited Annual Report. This report appears in Appendix 1 and students are
invited to refer to it frequently throughout the text.
Worksheets, based upon the balance sheet equation, are used to introduce accounting techniques and principles such as
duality. The in-chapter worked examples and end-of-chapter questions provide students with an understanding of concepts
such as assets, liabilities, equity, income, revenues and expenses, and allow them to see how financial statements are prepared.
This approach avoids the problems often experienced by students in trying to understand debits and credits.
The text covers financial accounting in Chapters 1 to 11, and these chapters focus on the development of accounting
information relevant to the decision-making needs of external users. Chapters 12 to 18 examine the decision-making needs
of internal users (i.e. managers) and provide an introduction to core management accounting topics. In each chapter, learning
objectives and key concepts are identified and highlighted. Review exercises are included and solutions are provided at the
end of each chapter. Additional review questions and problems are provided at the end of each chapter. The problems are
presented in order of difficulty. The more difficult problems are primarily intended for use in MBA courses. The ethics case
studies are intended for all students and are well suited to in-class group discussions. We recommend that students refer to
the comprehensive glossary as they work through the book.
Contemporary Accounting has been presented in a manner that students find easy to read. The response to the first nine
editions of this book has been very positive. However, there are major changes in the 10th edition of the book. These changes
have been made in response to comments from past and current users of the book, and also in response to changes that have
occurred in education, the business world and the accounting profession.

Copyright 2020 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
xii PREFACE

A new approach
As is usual, a thorough review of the text has been undertaken which incorporates feedback received and important
changes arising from the Revised Conceptual Framework published by the IASB in 2018. While the main elements of the
text remain, including the conceptual approach and the use of the worksheet, a number of changes have been made and are
summarised below.
The main changes to each chapter are outlined as follows:
»» Chapter 1 has been amended whereby the sections on sustainability reporting have been updated and relocated to Chapter 3.
»» Chapter 2 has been renamed to Business structures and financial reporting. There are significant changes in Chapter 2 to reflect
the new definitions of assets, liabilities, income and expenses arising from the Revised Conceptual Framework published by
the IASB in 2018. It also reflects the new definition of a reporting entity. There have been changes to simplify the format
with the use of more tables to replace long sections of text.
»» Chapter 3 has been renamed to Sustainability reporting, ethics and corporate governance. The material on sustainability from
Chapter 1 has been updated and relocated to this chapter. The section on ethics has been reduced and focuses more on
ethics in accounting.
»» Chapter 4 has been renamed to Different measurement methods. Economic value has been altered to value-in-use.
»» Chapter 5 has been amended to include the new definitions of assets and liabilities. The organisation of material has also
been amended to provide a better flow of the content.
»» Chapter 6 has a new section on the relationship between the balance sheet and the profit or loss statement. It also
incorporates the impact of the new definitions of income and expenses, plus the new accounting standard AASB15 Revenue
from contracts with customers.
»» Chapter 7 is similar to the 9th edition with the addition of updates where relevant.
»» Chapter 8 has been updated with current examples and the section on the theoretical formula in the reducing balance
depreciation method has been removed.
»» Chapter 9 has been renamed to Accounting for selected liabilities and sources of financing. The section on leases has been revised
to reflect the new accounting standard AASB 16 Leases. Some additional information on debt ratios has been added.
»» Chapter 10 has been renamed Analysis of financial statements. It has also been restructured in parts to simplify the format
with the use of more tables to replace long sections of text.
»» Chapter 11 has been renamed From the worksheet to debits and credits and remains similar to the chapter in the 9th edition.
»» Chapter 12 continues to build on the theme of management accounting systems being designed to provide information
to best meet the strategic decision-making needs of management. Recognising that the contemporary challenge for many
managers is to create the greatest value from their organisation’s activities, the chapter covers this topic by employing the
value chain model of business activities in combination with Michael Porter’s generic competitive strategies and five forces
analysis of competitive position.
»» Chapter 13 continues to examine the material on performance measurement, and this material provides a strategic analysis
of performance measurement, including the use of different financial and non-financial performance measures and the use
of the balanced scorecard as a comprehensive performance management framework. The use of the balanced scorecard as
a means for incorporating the non-financial measures incorporated in an organisation’s integrated report is discussed. The
material on Economic Value Added (EVA) has been removed and will be available as an extended online resource.
»» Chapter 14 provides a comprehensive examination of costs, including the nature and behaviour of costs, direct and indirect
costs, product and period costs, and the allocation of overhead costs using traditional volume and activity-based cost
allocation models. The importance of effective cost reduction strategies to enhancing the financial sustainability of an
organisation, particularly in the resources sector, is identified and serves to reinforce the idea that different costs are used
for different decision-making purposes.

Copyright 2020 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
 PREFACE xiii

»» Chapter 15 examines the nature and purpose of budgets with a detailed practical illustration of the development of a
master budget and the nature and purpose of projected financial statements.
»» Chapter 16 examines cost-volume-profit analysis, placing greater emphasis on the significance of operating leverage to
decisions about pricing, volume and cost structures as they affect organisational profitability.
»» Chapter 17 examines short-term decision making with and without resource constraints, as well as key management
accounting concepts such as sunk, opportunity and relevant costs.
»» Chapter 18 examines long-term decision making (i.e. capital investment projects). Previously incorporated materials on
financial maths, dealing with uncertainty, sensitivity analysis and post-implementation audits have been removed and are
available as separate online resources.
Additional resources included in the textbook are as follows:
»» Appendix 1 provides an extract from the Annual Report of Woolworths Limited for the year ending 30 June 2018.
Reference is made to the Woolworths financial report throughout the financial accounting section of the 10th edition,
enabling readers to examine the financial report of a real company. Most of the financial accounting chapters include
end-of-chapter questions relating to the report. These questions are intended to encourage student interest in reading
published financial reports and becoming familiar with the contents.
»» Updated recent newspaper articles are used to illustrate the various topics discussed in many chapters. These articles
provide a real-world context for the subject matter discussed, as well as stimulating student interest in accounting as a field
of professional practice.
»» At the end of each chapter we have introduced a new Take it further activity, which affords students the opportunity to
apply critical analysis to highly relevant accounting issues and problems. As critical thinking is an important employability
skill cited in employer surveys across many different careers, providing students with the further opportunity to develop
this significant transferable skill is desirable.

Copyright 2020 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
xiv

Guide to the text

As you read this text you will find a number of features in every
chapter to enhance your study of Contemporary Accounting and help
you understand how the theory is applied in the real world.

PART OPENING FEATURES CHAPTER OPENING FEATURES

Meet real professionals in this area in the Identify the key concepts that the chapter will cover
Practitioner Perspectives at the start of each part, with the Learning objectives at the start of each
and gain an insight into how accounting theory relates chapter.
to and informs their day-to-day practice. 3 4

Chapter 1 IntroductIon to accountIng 9

Practitioner Perspective Chapter 1

Lawrie Tremaine
InternalIntroduction
users to accounting
Lawrie Tremaine is a finance executive with over 30 years’ experience in
financial and commercial leadership. Lawrie is currently the CFO at Origin The major internal user of accounting information is the management of an entity. For a small entity this
Energy and was previously the CFO at Woodside Petroleum for six years. is likely to be the owner, or a small number of individuals in the case of a partnership. However, many
Lawrie also worked at Alcoa for 17 years, culminating in five years in Tokyo and businesses are much larger and are owned by numerous individuals or groups of individuals, as is the case
Beijing as Vice President Finance, Alcoa Asia Pacific.
with large entities such as Woolworths, National Australia Bank or Woodside Limited.
A large part of being a Chief the confidence to invest and to cases, the efficiency of decision Often the major investors themselves are owned by others, as is the case with the major financial
Financial Officer for a publicly minimise the cost of the invested making is dependent on the institutions. In such a situation, it is extremely unlikely that the actual owners would or could take an
listed company is informing capital to the company. quality of the underlying active part in the day-to-day running of the entity. Consider the chaos if all the people who bought shares
capital markets, employees and Similarly for national economies financial information. in Woolworths tried to take an active part in the day-to-day running of that business. Instead, these owners
other stakeholders about the to grow, they too need to attract Part 1 of this text will provide
or shareholdersLearning objectives
delegate the authority for the day-to-day running to a group of directors and managers.
financial position and prospects of capital. Capital flows are fluid and you with a broad understanding of
ChapteR 3 SuStainability reporting, ethicS and corporate governance These 79 directors and end
At the managers
of thisare involvedyou
chapter, in the routine
should bedecision-making
able to:
the company. global. Capital will preferentially Financial Statements. You will gain

Rido/Shutterstock.com
Financial information contained move to the capital markets which an appreciation of their purpose activities of theLO
entity
1.1 andexplain
their information
what is meant needs
by are
theequivalent to that
term ‘accounting’
in the Financial Statements, along are fair, well-regulated and function and the knowledge to interpret of the small business owner. These needs are normally met by unpublished
LO 1.2 explain the difference between management accounting, financial
with the Operating
Researchers haveand alsoFinancial well,studying
been actively demonstratedmany by liquid
questions and utilisecorporate
capitalconcerning financial statements.
governance. In reports of various kinds, accounting
usually basedand on tax
information provided through
Review and the results presentation flows. Once again, the availability addition, you will learn about the accounting
A number of studies have attempted tooftest whether companies with goodissues corporate governance perform both the financial accounting system and the management accounting
are critical to keeping capital reliable financial and operating of estimation, assumptions LO 1.3 identify the main users of accounting information, and the main
better in terms
markets, of profitability
both debt and equity, and share market performance.
information is vital to the Many studies and show a positive
judgements relationship
underpinning system. The exact nature of the reports varies from entity to entity. A
purposes for which the information is used
between the ownership of shares by theoperation
fully informed. CEO and of firm
globalperformance
and national and some showstatements
financial mixed results.
and how Studies
this department store may require information about the profitability of
have A company
also shownneedsthat to
it attract
is easier for thecapital to control and influence theisboard’s
CEOmarkets. vital to decisions.
the valid analysis of
For example, LO 1.4
each of its departments, identify
whereasthe limitations
a factory of accounting
producing a small information
number
capitalCPA
in 2017 to grow and create
Australia was value.
embroiled For these reasons,
By in controversy which eventually sawa the
public business.
CEO sacked and the entire LO 1.5is likely
of different products to require
discuss information
the factors about thethe
that influence profitability
choice of accounting systems for
definition, this means the company companies must ensure that Contemporary Accounting: a
Board resign. It was alleged that the CEO wielded too much influence over the board. of each product. different types of organisations
must invest in opportunities published Financial Statements Strategic Approach for Users is
An audit
which committee
provide returns in is excess
a subcommittee of the
and other board offully
disclosures directors
inform and written
is anotherfromimportant
the viewpointcorporate
of a The form ofLO each
1.6 report will also vary
demonstrate according to its
an understanding purpose.
of the If and environmental
regulatory
governance
of the costmechanism.
of capital. TheThe costaudit committee mayprospective
current and be chargedinvestors
with varioususerdutiesandincluding:
not a preparer. It avoids the purpose of the report is to assist management,
considerations it needs
that can influence to showdecisions
accounting
» of
overseeing the appointment
capital is determined by the of and ofrelationship withmatters
all the material the external
which auditordebits and credits and focuses on the past transactions and performance, probably measured against some
LO 1.7 explain what is meant by the term ‘economic consequences’ and relate
» availability
overseeingofthe capital and the of and may
appointment impact their
relationship withinvestment.
the internal auditor the language of accountants predetermined standard. For planning purposes, though, a forecast of what
this to the choice of accounting policies
» relative
reviewing risk of the company
compliance with regulations This means ensuring reporting
and accounting standards and how to use and analyse
is likely to happen in the future is more important. These different forms of reports and ways of grouping

FEATURES WITHIN CHAPTERS

or business opportunity. The is consistent with all regulatory financial statements. LO 1.8
» perceived
reviewingrisk internal control
is in turn procedures
impacted requirements but also going beyond With this being the 10th edition,
information are normally identify
referred tocareer
underopportunities
the heading offor‘management
accountants. accounting’.
» overseeing
by a numberthe company’s
of factors, risk management
including practices
this standard as required to meet the text remains up to date and As stated earlier, management accounting is the focus of the second part of this book. At this stage it is
» the
reviewing
quality ofthethecompany’s
investmentfinancial statements
the objective.and recommending themrelevant, to the incorporating
board for approval. The
the Revised worth briefly summarising the different categories of management accounting reports. To do this we need
thesis,
board leverage,
has to sign the off
reputation As a CFO I am
on the financial statements andalso the user
certify that ConceptualaFramework
of they represent true and fairissued
view of to make some generalisations about the needs of managers and to categorise those needs. In practice, of
Identify core ideas and important points with the
and quality of management and
the company.
country risk, among many others.
the Financial Statements of other
companies. I rely on their financial
by the IASB in 2018 and new
accounting standards. I commend Test your progress through each chapter by answering
course, there is a certain amount of overlap between the categories but we need not concern ourselves with
It is one matter to require the formation of an audit committee and another to specify its role and powers. this at present. The broad categories that we have referred to in terms of the needs of managers can be
Key concept boxes, which provide concise definitions of the Stop and think questions as you read. Solutions are
The availability of reliable, complete information as we consider them as this text to you as providing
Theand
above roles areprepared
consistently extensive and are suppliers,
financial not necessarily
tradingcarried out by all, orvaluable,
counterparties, even some, auditinsight
up-to-date committees.
in the found in Table 1.1.
Anand
important
operating issue for all audit
information is committees is whether
joint venture partnerstheoraudit
even committee use,should have itsand
interpretation own funding
analysis of Rather than getting deeply involved at this stage, let us first look at the other broad area we identified –
accounting concepts.
so vital to provide
it is not reliantinvestors with
upon management. acquisition targets.
If it is reliant upon In each of these for
management financial
funding statements.
it may not be able to provided at the end of the chapter.
the needs of users outside the entity: the external users. We shall be returning to the needs of internal users
effectively conduct its duties. in more detail in Chapter 12.

Key concept 3.5: Audit committee Stop and think 1

An audit committee is a subcommittee of the board of directors and part of the corporate governance of What are the needs of internal users? Can you identify any other needs of internal users? If so, can you
a company. Its roles vary according to the company but, in general, the role of the audit committee is to suggest how these would be met?
ensure that the financial statements have been reliably prepared and verified.

The major thrust for the creation of audit committees is to add credibility to the financial reporting process.
The critical issue relates to how independent the audit committee is, as this influences its effectiveness. Ian
Ramsay (2001) prepared a report for the federal government of Australia following the problems with HIH,
One.Tel and others. In his report, Ramsay made the following comments about audit committees.
» An effective audit committee must not only exist and be independent, it must actually meet and be active.
» Audit committee members must be independent.
» Each member should be financially literate or should, within a reasonable period of time after
appointment, become financially literate.

3.5 Enforcement of corporate governance LO 3.5

Identify the approaches
The response of government to company failures has been somewhat different in the USA and Australia. The to enforcing corporate
governance requirements
USA adopted what is described as a ‘black letter law’ approach through the passing of the Sarbanes-Oxley Act
in australia and the USa.
in 2002. This is an extensive legislative response to corporate failures and has many requirements including:
» the establishment of a Public Company Accounting Oversight Board with responsibility for overseeing
the work of audit firms
» significant new rules relating to auditor independence

Copyright 2020 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
 Key concept 4.1: Wealth
Wealth is a static measure and represents a stock at a particular point in time. This stock can change
over time. So, the wealth measured at the start of a period will not necessarily be equal to the wealth
measured at the end of the period. The difference between the two is the profit or loss for that period
of time. GUIDE TO THE TEXT xv
Key concept 4.2: Profit
38 part 1 financial accounting
Profit represents the difference between the wealth at the start of the period and at the end of
the period. Unlike wealth, which is essentially a static measure, profit is a measure of flow which
summarises activity over a period. 262 part 1 finAnciAl Accounting
Statement of profit or loss and other
FEATURES
To summarise, we WITHIN
time T , as:
CHAPTERS
have shown that we can express the profit for the first period, from time T to 0 comprehensive income
1 In response to the problem of the non-disclosure of leases, the accounting profession issued accounting
profit for period1 = wealth1 − wealth0
The first difference is in the title of the statement: the fact that Jack is a proprietary limited company must
standards that required the reporting of leases that met certain criteria. In Australia, AASB 1008 Accounting
be stated, and the new title does this. In addition, the statement contains comparative figures for the
Analyse in-depth Case studies that present issues in
for Leases was the initial standard and, with the adoption of IFRSs, this was replaced with AASB 117 Leases.
See step-by-step examples of how to approach
Similarly, we can express the profit for the second period, the period between time T1 and time T2, as: previous year, as well as references to a number of notes. These notes contain greater detail than can be
In 2016 this standard was replaced by AASB 16 Leases. AASB 16 requires a lessee to record a lease as an
profit for period2 = wealth2 − wealth1 shown Accounting
on the face of the statement, and so are an integral part of the analysis of the accounts of a company.
important concepts in the Worked examples. 262 part 1 finAnciAl
We have also established that the profit or loss is derived by measuring the wealth of an individual, or context, encouraging you to integrate and apply the
asset and a liability at the present value of the lease payments for the period the lease is non-cancellable.
This will be discussed in more detail in Chapter 10. We can see that down to ‘Gross profit’ the format is
familiar. However,
studywe 9.1then find that expenses are classified into broad categories. These categories are
an entity, at two points in time. Now let us look in more detail at what we are trying to measure and how
we can measure it.
Case
concepts discussed in the chapter to the workplace.
laid down in AASB 101 Presentation of Financial Statements. The other difference is that the statement is
In response to the problem of the non-disclosure of leases, the accounting profession issued accounting
Each one has a clearly marked Commentary section that
We start by examining the case of an individual because this is simpler and more in line with your own called a statement of profit or loss and other comprehensive income. CompanyWe A discuss statements of financialB
Company
standards that required the reporting of leases that met certain criteria. In Australia, AASB 1008 Accounting
performance in detail in Chapter 6.
experience. The underlying arguments and principles are just the same for an entity but the degree of for Leases was the initial standard and, with the adoption of IFRSs, this$was replaced with AASB 117 Leases. $
complexity increases. Let us suppose that we asked an individual to measure his or her wealth; that is, the It is from
Assets
In 2016
the point at
discusses the case.
which the profit is shown that the real differences arise. The most striking
this standard was replaced by AASB 16 Leases. AASB 16 requires a lessee to record a lease as an
these is that taxation is included in the statement of profit or loss and other comprehensive income. This is
of
sum of possessions less debts. asset and a liability
becauseCurrent assets isatrecognised
the company
the present value of the lease payments for
as a separate entity for legal and
the
100tax
000period the lease is non-cancellable.
purposes and its profits are100 000
liable
Non-current
to company assets the sole trader and the partnership1are
tax. In contrast, 900not
000separate legal or taxable1entities:
400 000
Worked example 4.1: Alexia Case study 9.1
their profits are not taxed as such, but only as they form part of the
Total assets income
2 000 000 of the owner. 1 500 000
Alexia came up with the following list of assets and told us that she owed nothing.
Liabilities Company A Company B
Balance sheet
At the start of the year: T0 At the end of the year: T1 Current liabilities $
500 000 $
500 000
We now look at the balance sheet of a proprietary limited liability company and the differences that arise.
A new Toyota Corolla A one-year-old Toyota Corolla Assets
Non-current liabilities 500 000 –

Scout Kozakiewicz
The format uses the current/non-current classification. AASB 101 allows companies to choose an
One new dress The same dress Total
Currentliabilities
assets 1 000
100 000 500
100 000
alternative format in which assets and liabilities are listed in order of liquidity. Most banks list assets and
Five shirts The same five shirts Net
liabilities inassets
Non-current
order ofassets
liquidity and do not use the current/non-current 1 000
900 000 000 000
classification. We discuss1 balance
400
Four pairs of jeans Five pairs of jeans Shareholders’
sheets Total assets
in detail equity5.
in Chapter 2 000 000 1 500 000
reserves
One surfboard One surfboard (Chapter 2) Amounts As you can
up see,
Liabilities
Paid the top part of the balance sheet is similar to those
capital 500 we
000have encountered before,500 except
000
$400 cash $500 cash set aside out of profits for theRetained
inclusionliabilities
Current of dividends and taxation and the fact that a lot of500
profits the 000
detail is included in the notes500
to the
000
and other surpluses statements. For example, Note 6 would contain details of non-current assets bought and sold during the
which are not designed Non-current liabilities 1 000
500 000 1 000 000 –
While the lists above might accurately reflect the assets Alexia controls and what sheto owes, we cannot
meet any liability,
year, as well as the depreciation to date, and that charged during the year.
easily see whether she is better or worse off at the end of the year than she was at the start. With thecommitment
contingency, The Total
lowerliabilities
part of the balance sheet is somewhat different in1that 000 the
000 owners’ equity is referred 500to000
as
benefit of our own knowledge of the world, we could perhaps say that she must be worseoroff because in value of
diminution share Commentary
Net assets
capital. This might consist of different types, each carrying 1 000 000 voting rights, and so1on.
different 000This
000
assets known
everything is one year older. This, however, assumes that the value of her possessions decreases withtotime.
exist at
wouldThe only be difference
apparent
Shareholders’
only ifbetween
equitywe lookedtheatbalance
the detail contained
sheets in the notes.
of Company A and Similarly,
Companythere may000
B is $500 be different
in
the date of the balance
In many cases that is a reasonable assumption, but clearly there are cases where the value increases. For types non-current
of reserves, assets
such asand
a $500 000 inreserve
revaluation non-current
for liabilities.
revalued Company
assets such asAland
has and
just buildings.
borrowed $500
Jack 000a
has
sheet. Reserves do not Paid up capital 500 000 500 000
example, would our attitudes towards the value of her possessions change if the car wasequal a 1956 FJ
cash.
Holden? from the
revaluation bankand
reserve over a period
more of are
details 10 years. It has
provided inpurchased
the statementa machine thatin
of changes has an estimated life of 10
equity.
Leaving that question aside for a moment, you may have noticed that as soon as we started to discuss the Retained
years with profits
zero residual value. B has just signed a lease agreement 500 000to acquire the use of an identical 500 000
measurement of wealth we also started talking of the more abstract concept of value. machine to that purchased by A. The lease agreement is for 10 years
1 000 000 and cannot be cancelled 1 000by 000
>
2.2 Financial statements
LO 2.2 either party unless B fails to make a lease payment. Given these facts, should the balance sheets 601

Identify the main of A and B be any different? In Company A’s balance sheet, total liabilities to shareholders’ equity
Commentary
characteristics of the
for a public company
is 100 per cent. However, for Company B this ratio is only 50 per cent. This suggests that the lease
financial statements of
a public company and Appendix 1
arranged
non-current
The statements
by Company
The only difference
assets and
presented
B is less
between
for $500
the
Jack 000
risky
Pty Ltd
than sheets
balance that arranged
in non-current
of Company
above are forliabilities.
by Company
a privateCompany
companyAand
A. Is this B
A and Company
hasarejust
a fair conclusion?
is $500
borrowed
simpler
000 in
than$500
those 000for
the role and meaning of
from
a public the bank
company. over a period
Woolworths is aofpublic
10 years. It has and
company purchased a machine
its financial that has
statements an estimated
illustrate the usual life of 10
format
consolidated financial
The asset
with recorded in thevalue.
lessee’s accounts is then lease
amortised or depreciated to the statement of profit or
Extracts from Woolworths Ltd 2018 Annual Report
years zero residual B has just signed
statements. of each statement. Refer to the Woolworths financial areport agreement
in Appendixto1.acquire
Note that the use of an identical
statements are
machine
loss and other to that purchased by
comprehensive A. The
income lease
over theagreement
lease period.is for
The10lease
years and cannot
liability be cancelled
is reported by
as a non-current
headed ‘consolidated’.
either
liability party
see theunless
Toexcept the B fails
full portion
annual to make
report, athe
lease
pleaseinvisit
payable next payment.
12 months Given
whichthese
http://www.woolworthslimited.com.aufacts, should
is reported the
andasfollow thebalance
a currentlinks sheets
to the
liability. Investor Centre
Each lease
Extracts from the Woolworths Ltd 2018 Annual Most major
and then
of A and
companies,
B be to any
Reports. such as Woolworths, operate in a parent–subsidiary (or controlled entity)
different? In Company A’s balance sheet, total liabilities to shareholders’ equity
W
payment incorporates principal and interest components; the interest component is treated as an expense.
relationship forcent.
is 10060per a variety
However, of for
reasons.
CompanyIn fact,
B thissuch
ratio companies often
is only 50 per cent.control
This suggests many that companies.
the leaseFor
The liability is systematically reduced in each period by the principal component of each lease payment.
Report are included in the Appendix, and the example, Woolworths
arranged
Therefore, each
by Company has over
lease payment
Auditor’s
70 risky
B is less wholly
is similar
Independence
owned
than subsidiaries,
that arranged includingA.Cellarmasters
by Company Is this a fair conclusion?
to the loan repayment that Company A would be required to make
Declaration
and Safeway.

margin icon indicates places in the text where reference in Case study 9.1.
The asset recorded in the lessee’s accounts is then amortised or depreciated to the statement of profit or
Deloitte Touche Tohmatsu

is made to these extracts. These will help you become

A.C.N. 74 490 121 060
loss and other comprehensive income over the lease period. The lease liability Grosvenor Placeis reported as a non-current
225 George Street
liability except the portion payable in the next 12 months which is reported as Grosvenor
Sydney NSW 2000
PO Box N250 a currentPlace liability. Each lease
familiar with and appreciate the functioning of a real
Sydney NSW 1217 Australia
payment incorporates principal and interest components; the interest component
The Board of Directors
Woolworths Group Limited
DX 10307SSE is treated as an expense.
Tel: +61 (0) 2 9322 7000

The liability is1Bella

systematically
Woolworths Way
reduced in each period by the principal component
Fax: +61 (0) 2 9322 7001
of each lease payment.
company’s financial report.
Vista www.deloitte.com.au

Therefore, each lease payment is similar to the loan repayment that Company A would be required to make
NSW 2153

in Case study209.1. August 2018

Dear Board Members

Woolworths Group Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence
to the directors of Woolworths Group Limited.
As lead audit partner for the audit of the financial statements of Woolworths Group Limited for the financial year ended 24 June 2018,
I declare that to the best of my knowledge and belief, there have been no contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
128 pArt 1 applicable
(ii) any financial accoUntinG
code of professional conduct in relation to the audit.

Yours sincerely

There are also issues relating to the ways in which a business is perceived and the ways in which
management wishes the business to be perceived. Research has shown that managers, especially the

The Ethics and corporate social responsibility Ethics/CSR DELOITTE TOUCHE TOHMATSU
managers of smaller entities, believe bankers are interested in the amount of assets available as security
for a loan or overdraft. There is therefore a temptation to try to enhance the value of assets, perhaps by
icons in the margin highlight ethical issues and
Sometimes managers revaluing land and buildings, before applying for a loan. Similarly, in a number of cases where a business
might feel the temptation
to try to enhance assets is in trouble, assets have been revalued in order to bolster the image of the business and to promote the
discussion of CSR throughout the text. on a balance sheet when
applying for a loan. There
impression of a sound asset base.
In Australia there are severe penalties for directors of public companies or other entities who attempt
can be severeA penalties
V Griffiths
for this. Partner fraudulently to inflate assets or decrease liabilities. In Chapter 1, we discussed contacts, agency costs and
Chartered Accountants
incentives for managers to select certain accounting policies but this does not include fraudulent behaviour.
In Chapter 3, we discussed the concept of ethics and the costs of unethical and fraudulent behaviour.

Stop and think 4

What are the main limitations of a balance sheet? Does this mean a balance sheet is of no use?
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited

Format used in the book

In this chapter we have defined the nature, purpose and content of balance sheets and highlighted some of
the problems with such statements. We have also introduced the wider context in which accounting reports
can be viewed. Before proceeding, it is important to make sure you understand the definitions involved and
can apply them to real problems. As you have seen, a balance sheet can take many forms and in a book of
this nature there is no need to cover all of them. For simplicity, therefore, we use one format throughout
the book − the one shown for Simple Ltd in Worked example 5.3.
The needs of an entity determine the format of the balance sheet. We have chosen a format appropriate
to an introductory text. Before following a different format, ensure that you understand the reasons behind
it and consider whether the information is presented as clearly as it is in the Simple Ltd balance sheet. This
W format is the one previously required under the Corporations Act 2001 and many companies in Australia are
still using it. Turn to Appendix 1 and study the balance sheet of Woolworths Limited and note its format.
The balance sheet is headed with the name of the entity and the date to which the statement relates. As
explained previously, a balance sheet relates to one point in time and that date needs to be clearly stated
in the heading.
Finally, we emphasise again that a balance sheet’s format may differ according to the requirements of the
users or the owners (as illustrated in the previous section by examples for an individual and a partnership).
Other formats are also possible. For example, it is unlikely that a corner store would be part of a public
Copyright 2020 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated,
company. A more in whole orformat
appropriate in part. WCN
in this case may02-200-202
be to list the current assets less the current liabilities.
If current assets are more than current liabilities, this would indicate that the business should be able to
meet its short-term commitments when they become due.
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now to explore a rich
collection of testbank or
solution manual and enjoy
exciting offers!
xvi GUIDE TO THE TEXT

END-OF-CHAPTER FEATURES
At the end of each chapter you will find several tools to help you to review, practise and extend your knowledge of the
key learning objectives. Chapter 1 IntroductIon to accountIng 23

Study tools
Summary
Review your understanding of the key LO 1.1
Explain what is meant by the term ‘accounting’
These definitions and recognition criteria are discussed
in Chapter 2.
24 part 1 FInancIaL accountIng
chapter topics with the Summary. In this chapter we have tried to give an idea of what
accounting is and how it pervades both the internal workings LO 1.5
of organisations and the external commercial environment. It Discuss the factors that influence the choice of
can accounting systems for different
work intypes
large,of organisations
LObe1.8
seen at one level as a functional area of business and administration. Accountants medium and
at an external level as an important determinant of business The
smallfactors that influence
organisations the choice
preparing of an
financial accounting system
statements
Identify career opportunities for accountants include the size
survival through its effect on groups such as shareholders, and all types of of the organisation,
information the type
for internal of business
decision making by
Accountants work in many areas and in many types of activity being undertakenalso
andwork
whether it is simple orentities,
complex,
lenders and employees. managers. Accountants in not-for-profit
organisations. Accountants work in public accounting the structure of all
thelevels
organisation and whether the organisation
which include of government and other areas such
firms providing various services including audit and
LO 1.2 isasfor-profit or not-for-profit.
health, education and social services.
assurance, taxation, an advisory service, and insolvency and A failing business will still fail even though it has an
Explain the difference between management
accounting, financial accounting and tax accounting excellent accounting system; on the other hand, potentially

review questions
Management accounting is prepared for internal users and is
largely unregulated. Financial accounting results in financial
successful businesses have been allowed to go bankrupt
because the accounting system did not give any warning
1 For what
statements purposes
prepared is accounting
for external information
users in accordanceused:
with signs or gave them notice too late to allow management to
GAAP.– Taxbyaccounting
the individual
involves the preparation of tax returns take action to rectify the situation.
where– theby the entity
objective is toorreport
organisation?
the activities of the organisation
2 compliance
in Exampleswith werethe
given of certain
tax rules limitations
so that of accounting
the organisation LO 1.6 Can you give examples of your own?
pays information.
3 minimum
the What areamount
some ofofthetaxcareers for accountants?
to the government. Demonstrate an understanding of the regulatory
4 Why would employees require financial information about anand environmental considerations that can influence
employer?
5LO When
1.3 would customers require financial information about aaccounting provider of adecisions
product or service?
Test your knowledge and consolidate your 6 Do you
Identify
the
7 main
the think
maincompanies
Whatpurposes
would provide
users of accounting
is the impactforofwhich
financial information
information,
the information
technology on accounting?
and
is used
The Corporations
if they Act influences
were not required theCorporations
to by the financial reporting
Act?
of companies and other entities required to register with

learning through the Review questions, There

8 Whatare many
is theusers of accounting
difference betweeninformation
management
they include internal users (managers) and external users
ASIC. Developments in technology and outsourcing certain
andand financial accounting?
procedural bookkeeping tasks have also had a major impact

Take if further activity and Problems Take it further

(shareholders, lenders, suppliers, customers, employees,
government and the general public). We have shown that there
upon the function of accounting.

LO 1.7
for discussion and analysis. is Much has been
no perfect writtenreport
accounting aboutthat
thewill
impact
meetofthe
technology on accounting
needs of all and the potential loss of jobs as a result of automation.
The and
users, 2015 publication
that the needs the Australia’s
of users vary. ForFuture Workforce?,
example, published
in the case by the
Explain Committee
what is meantforby
Economic
the term Development
‘economic of
Australia, is one example. Conduct internet research
of a small business the owner may wish to show a low profit to to see if you can locate
consequences’otherand
more recent
relate examples.
this to the choice of
accounting policies
reduce the potential tax bill, but may need to show a high profit
problems for discussion and analysis
in order to persuade a banker to lend the business money. The economic consequences of accounting policies
can influence a manager’s choice of accounting policies.
Chapter 2 Business structures and financial reporting 67
1LO Refer
1.4 to the 2018 Woolworths financial statements in Appendix Accounting
1. numbers are used in various contracts and this, it
a the
Identify
b
What
Does
is the nameofofaccounting
limitations
Woolworths
the auditinginformation
include shares
firm?
as part of the policies
remuneration forbased on their impact on the numbers in the
employees?
W
is argued, creates incentives for managers to choose accounting
We have shown that accounting will be useful only if it is
used ccorrectly
Required Do these
and shares affect the are
if its limitations determination net profit forcontracts.
understood.ofFinancial Woolworths? Managerial compensation and debt contracts create
2 In your own words, describe what you
accounting is based on past information and only includesthink accounting meansincentives
and for
what managers
accountants to do
favour
in a profit-increasing accounting
small and very large
Calculate
those Bob’sthat
business.
elements share
meetof the
the profits overand
definition next three years if hispolicies.
therecognition Political
optimistic costs
estimate is create incentives for managers of large
correct.
3 aDiscuss
criteria forCalculate Bob’s share
whatliabilities,
assets, information of the
you
income, profitswould
believe
expenses over
andthe
be next three
useful
equity. organisations
to theyears if his most
following toprobable
groups favour profit-decreasing
of reportestimate accounting policies.
users: is correct.
ba Calculate
employeesBob’s share of the profits over the next three years if his pessimistic estimate is correct.
cb If the probabilities are 20 per cent that
investors
the
c regulatorsoptimistic estimate will be correct, 60 per cent that the most probable estimate will be correct, and 20 per
d cent that the
suppliers pessimistic
of goods estimate will be correct, should Bob sell for $80 000?
and services
de Discuss
customers. the other factors Bob should consider when deciding whether or not to sell.
4 If you work for an accounting firm, whose perspective should you take – the firm’s, the client’s, the user’s or your own?
ethics
5 You own and case
run a smallstudy
supermarket. What accounting information do you need, and how often?
6 You are the manager of a small local band which are offered $1000 for a three-hour performance. What financial
Tom(accounting)
has been employed
issues doat New Incentives
you have Ltd for
to consider six months,
before after
accepting or recently
rejectinggraduating
the offer? from university with a degree in
Apply what you have learned to real-world accounting. It is his first job after trying to find employment for six months. Tom’s boss has asked him for a favour in preparing
the profit or loss and statement of comprehensive income for the year. She wants Tom to include in income cash received for
ethical dilemmas In the Ethics case study services to be provided next year. She also wants him to record as an asset cash paid for advertisements that were screened on
television two weeks before the end of the accounting period. Tom is aware that management is to be paid bonuses based on
at the end of every chapter. the net profit for the period.

Discuss
a How the transactions should be reported according to your understanding of the IASB Conceptual Framework 2018
b What Tom should do.

Cool Value Cinemas

Go to the online case and answer the questions related to Chapter 2

Suggested answers to stop and think exercises

1 A company allows funds to be raised from members of the public. Therefore, it provides greater access to funds than a
partnership. However, companies are subject to more rules and regulations and these rules are increasing in the wake of
the collapse of companies like HIH, Enron and WorldCom. Shareholders in a limited company are only liable for the
amount paid on their shares, whereas partners may be jointly and severally liable for all partners’ debts. A company is a
separate legal entity, whereas a partnership is not.
2 This is a difficult and controversial question. In the USA the Sarbanes-Oxley Act 2002 places restrictions on the type
of services, other than auditing, that an audit firm can provide to an audit client. The approach in Australia involves
some restrictions and more disclosure about the fees an auditor derives from the provision of other services to an
audit client. The real issue is auditor independence, and some argue that an auditor can provide other services and
still be independent due to professionalism. Others disagree and, partially as a result of what happened with Enron,
argue for restrictions on the amount and type of other services an auditor can provide to audit clients.

Copyright 2020 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
 xvii

Guide to the online resources

FOR THE INSTRUCTOR

Cengage is pleased to provide you with a selection of resources that

will help you prepare your lectures and assessments. These teaching
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SOLUTIONS MANUAL
The Solutions manual provides detailed solutions to the review questions and problems in the text.

TEST BANK
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students. Deliver these through your LMS and in your classroom.

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xviii GUIDE TO THE ONLINE RESOURCES

POWERPOINT™ PRESENTATIONS
Use the chapter-by-chapter PowerPoint slides to enhance your lecture presentations and handouts by reinforcing the
key principles of your subject.

ARTWORK FROM THE TEXT

Add the digital files of graphs, tables, pictures and flow charts into your course management system, use them in
student handouts, or copy them into your lecture presentations.

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 xix

About the authors

Phil Hancock is a Professor of Accounting and the Associate Dean of Teaching and Learning for the Faculty of Arts, Business,
Law and Education at the University of Western Australia. Phil has extensive experience in the regulation of corporate
financial reporting, management and international accounting in both the educational and private sectors. Phil was Chair
of the Accounting Learning Outcomes Working Party, which was responsible for drafting the threshold learning standards
for graduates of bachelor and master degrees in accounting in 2010 and revised in 2016. Phil is a Fellow of CPA Australia
and the Chartered Accountants Australia and New Zealand and the Accounting and Finance Association of Australia and
New Zealand (AFAANZ). In 2013 Phil was awarded the Outstanding Contribution to Accounting and Finance Education by
AFAANZ. He is a previous President of the Western Australian Divisional Council for CPA Australia. As an academic, Phil has
held senior positions at the University of Western Australia, Edith Cowan University and Murdoch University, where he was
an Associate Professor in Accounting.
Peter Robinson has taught at all West Australian universities, spending more than 20 years with each of Curtin University
and the University of Western Australia (UWA). Peter has also held teaching appointments with the University of Melbourne,
the University of New South Wales (UNSW), the University of Texas at Austin and the University of South Africa. Peter
has taught the breadth of the accounting curriculum at undergraduate and post graduate level with strategic management
accounting and public sector financial management being his more recent areas of teaching specialisation. Peter is Academic
Co-ordinator for Work Integrated Learning (WIL) for the Faculty of Arts, Business, Law and Education at the University of
Western Australia. Peter is a Fellow of CPA Australia and a member of the Accounting and Finance Association of Australia
and New Zealand (AFAANZ). Peter has also been an active contributor to the development and delivery of study materials
used by candidates seeking admission to the former Institute of Chartered Accountants in Australia and CPA Australia; to
the professional development of managers and senior executives in the for-profit, not-for-profit and public sectors, both
in Australia and internationally; and has regularly consulted with clients in these sectors upon a wide range of financial
and performance management topics. Apart from Peter’s undergraduate and post graduate studies in accounting with
Curtin, UWA and UNSW, he has a Master of Education (UWA). Over the past five years, Peter has contributed, as reviewer,
presenter of professional development material to high school teachers, and as chief examiner in 2011, 2012 and 2017 and
as independent examiner in 2018 to the development and delivery of Western Australia’s Certificate of Education Accounting
and Finance course of studies for Year 12 senior secondary school students.
Mike Bazley (1931–2013) was the inspiration behind the first edition of this book, which now enters its 10th edition. The
success of this text is a tribute to Mike’s perseverance, as many of the publishers he initially approached were not particularly
interested in his idea of adapting the UK text Accounting in Business Context. However, Thomas Nelson, now Cengage
Learning, finally agreed and in 1991 the first edition was published. Sadly Mike Bazley passed away in February 2013. Mike
was an excellent teacher and highly regarded by the students he taught, an outstanding work colleague, a valued friend and a
true gentleman to all that he met. He is deeply missed by his family and many friends and former colleagues.
Mike Bazley was born in the United Kingdom where, having undertaken national service, he joined a medium-sized
company and worked his way to joint managing director. In 1969, Mike migrated to Australia and began his period of
employment at the University of Western Australia, which eventually led him to taking up a lectureship in 1977 in UWA’s
then Department of Accounting and Finance. He subsequently took up a position with Murdoch University where he was
Dean of Studies and Chair of the School of Commerce and Senior Lecturer. In addition to his academic work, he also consulted
for the West Australian state government, conducted public seminars and contributed to various academic and professional
publications. Mike was a Fellow of CPA Australia. Having retired in 1995, Mike still continued to take great interest in the
development of this text.

Copyright 2020 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
xx

Acknowledgements
We acknowledge our debt to Aidan Berry and Robin Jarvis, the authors of Accounting in Business Context published in the UK.
This book was originally based on the British text, although the two books are now significantly different. Responsibility for
the opinions expressed and for any errors in this book is entirely our own.
Phil Hancock
Faculty of Arts, Business Law and Education
The University of Western Australia
Peter Robinson
Faculty of Arts, Business Law and Education
The University of Western Australia
Mike Bazley
Cengage Learning would also like to thank the following reviewers for their incisive and helpful feedback:
»» Asit Bhattacharyya (University of Newcastle)
»» Md. Borhan Uddin Bhuiyan (Massey University) Sudipta Bose (University of Newcastle)
»» Robyn Davidson (University of Adelaide)
»» Peter Graham (University of Canberra)
»» Nicole Ibbett (Western Sydney University)
»» Ian Maclean (University of Canberra)
»» Heinrich Oosthuizen (University of Tasmania)
»» Dr Graham Ray (Southern Cross University)
»» Erwei (David) Xiang (Edith Cowan University)

Copyright 2020 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
Exploring the Variety of Random
Documents with Different Content
hands against a son of Monomach. But if thou wilt march against the
house of Oleg, we will not only go with thee, but take our sons also.”

The prince, however, asked for volunteers to attack Yuri, and a large
number went with him. On passing the Dnieper, he sent Ulaiba, his
boyar, to learn what was happening in Chernigoff. The boyar hurried
back, bringing news that the allies of the Kief prince were acting
with Sviatoslav. Chernigoff friends also sent to Izyaslav, saying that
his allies were deceiving him foully. “They wish to slay or to seize
thee, and liberate Igor. They have kissed the cross to Sviatoslav, and
also to Yuri.”

The Kief prince now sent envoys to confer in his name with the sons
of David: “We agreed on a great work, and kissed the cross to each
other,” said the envoys. “Let us kiss it again, so that there be no
disagreement hereafter.” “Why kiss again? We have kissed already,”
replied the sons of David. “What harm in kissing the cross?” said the
envoys. “The cross is salvation.” But they refused to kiss it a second
time. The envoys repeated now these words from Izyaslav to the
sons of David: “I have heard that ye are deceiving me, that ye have
sworn to Sviatoslav to seize me or to kill me because of Igor. Is this
true, brothers, or is it not true?” They would not answer. At last one
of them said to the envoys: “Withdraw, we will summon thee later.”
They consulted long, and then called the envoys.

“We have kissed the cross to Sviatoslav,” declared they frankly. “We
grieve over Igor, our cousin. He is a monk now; set him free, and we
will ride at thy stirrup. Would it please thee if we held thy brother?”
The treaty papers were cast at their feet, and these words were
added in answer: “Ye took oath to be with me till death, and I gave
you the lands of both sons of Oleg. I expelled Sviatoslav; I won his
lands and gave you Putivl with other places. We divided Sviatoslav’s
property between us. I took Igor’s. And now, brothers, ye have
broken your oath. Ye invited me hither intending to kill me. Let God
be on my side and [71]the power of the life-giving cross. I will
manage as the Lord may assist me.”

The prince asked Rostislav, his brother, to bring Smolensk forces

from all sides. He sent to Kief also, explaining the conduct of the
sons of David, and reminded the people of what they had promised.
The Kief men decided immediately to go forward in boats and on
horseback to help him. “We rejoice,” declared they in a message,
“that God has preserved thee. We come and bring our sons with us,
according to promise!” When thus excited, some man in the throng
called out loudly: “We will fight for our prince, but think first of one
important thing. Here in this city is the enemy of our prince. Let us
slay him to finish that family in Chernigoff, and then go!” The people
rushed to the monastery, and before Prince Vladimir, the
metropolitan, or the commander in the city, could stop them they
had seized Igor, and slain him.

Izyaslav was at the edge of Chernigoff when news of Igor’s death

came to him: “If I had thought of this, I should have guarded him
more carefully,” said he to his warriors. “Men will say now that I
wished to kill Igor, but God knows that I did not.” “Be not
concerned,” answered his warriors. “God knows, and people know,
also, that not thou, but his own cousins killed him; they who took an
oath to thee, and then conspired traitorously to kill thee.”

Izyaslav seized Kursk, where he placed his son, Mystislav, and thus
barred out the Polovtsi. But Glaib, son of Yuri, came later with
Sviatoslav to take the place. The people would not raise a hand
against Glaib, since he was a grandson of Monomach. They would
have fought against Sviatoslav had he come unassisted, as they
informed Mystislav, who returned to his father.
Glaib, after installing posadniks, left that region, and the Polovtsi
were free to appear again. Rostislav of Smolensk led in large forces
to help his brother, the Grand Prince, and after an involved and
tedious war, ending rather against Izyaslav than for him, the
Chernigoff princes were unable to continue the struggle; their
territory was stripped of provisions, and ruined in great part; they
had no food for their warriors, and could not pay Polovtsi allies. Yuri
had sent a son with forces, but he would not go with his main
strength in person, and without Yuri the Chernigoff princes were
unable to stand against Izyaslav and his brothers. [72]

In such straits, they sent these words to Yuri: “Thou didst kiss the
cross to go with us against Izyaslav; thou hast not done so. Izyaslav
came, burned our towns, took our country. He came a second time;
he burned and seized what he spared at the first attack, but thou
hast neither come to us nor fought against Izyaslav. If thy wish is to
march now against the Kief prince, we will go with thee; if not, we
are freed from our oath; we have no wish to perish in war
unassisted.”

From Yuri came no answer of value, hence they turned with

proposals to the Kief prince. He replied that he would consult with
Rostislav and then answer finally. He consulted with his brother for
form’s sake, and then made peace with the princes of Chernigoff,
who took oath to forget Igor’s death, and be in friendship for the
future. Kursk remained in their possession.

At this time Rostislav, Yuri’s eldest son, once prince in Novgorod,

came to Kief, declaring that he had quarreled with his father, who
refused him land in Suzdal; hence he had come to Izyaslav with
homage. The Kief prince gave him those five towns held formerly by
Sviatoslav, son of Vsevolod, and also Gorodok, where Izyaslav did
not wish to see Yuri’s son Glaib, to whom he sent this command:
“Find lands with the sons of Oleg.”

In autumn, the Grand Prince went to Gorodok, taking Rostislav with

him. The sons of David were there, but no son of Oleg. When
Izyaslav mentioned this, the princes replied: “We are here. It is
indifferent whether they come or not; they and we took the oath to
make common cause with thee, and to go with thee against Yuri,
starting when the rivers should be frozen.” They who had been Yuri’s
allies a short time before had now become his enemies, and allies of
Izyaslav. When the time came, Izyaslav left Vladimir, his brother, in
Kief, and visited Smolensk, to confer with Rostislav.

Novgorod had assembled large forces to march against Yuri, and

now sent many warriors, as did Smolensk. They moved down the
Volga, and, finding no trace of Yuri, ravaged both sides of the river
as far as Uglitch. Here news came that the sons of David, with
Sviatoslav, brother of Igor, had marched to assist them, but had
halted in the Vyatichi country to see who would be victor, the Kief
prince, or Yuri.

“Let them come or stay,” replied Izyaslav, and he sent Novgorod men
and others to take Yaroslavl on the Volga. This they [73]did after
much effort, and returned with great booty. A week before Easter
the weather became so warm that the army could not remain in the
country. Horses walked to their bellies in water. Rostislav went back
to Smolensk, and Izyaslav to Novgorod and thence to his capital.

This campaign cost Yuri’s country seven thousand men led away
captives, besides all the property burned and ruined. Upon Izyaslav’s
return to Kief, he learned from his boyars that Yuri’s son, Rostislav,
had worked against him in his absence, and had said to the people:
“If God helps my father, he will visit Kief and take Izyaslav’s house
from him, and also his family.” “Send this traitor back to his father;
thou art keeping him here to thy ruin,” said the boyars. The prince
summoned Rostislav, and, without receiving him, gave this message:
“Thou didst come to me and say that thy father was unjust and
would give thee no land. I took thee in as a brother, I gave thee
lands, and now thou wouldst seize Kief from me.” Yuri’s son sent
back this answer: “Neither in my heart nor my mind was the thought
which thou hast mentioned. If he who has lied is a prince I am ready
to meet him, if of lower degree, either Christian or pagan, judge
thou between us.” “Ask no judgment of me,” replied Izyaslav. “I
know what thou wishest. Go back to thy father.”

The boyars put Rostislav in a boat with three men and sent him up
the river. His warriors were retained, and his property taken.

Rostislav bowed down to his father in Suzdal, and said: “The whole
Russian land desires thee. Men say in Kief that their prince has
dishonored them. March thou against Izyaslav.” These words imply
clearly that Yuri’s son had worked with zeal against Izyaslav, and
that the complaint of the boyars was well founded.

Such an “insult” to Rostislav greatly offended Yuri, who demanded

angrily, “Is there then no place for me or my sons in Russia?” He
assembled his forces quickly, hired Polovtsi, and was soon ready for
action.

It was not anger alone which roused Yuri; he believed that his day
had come, the long deferred day of triumph. His son’s report that he
would find in the south serious allies, decided his movements, and
he marched forward with all speed. He had reached the land of the
Vyatichi, when Vladimir, son of David, warned Izyaslav, saying: “Be
ready for action; thy uncle is marching.” [74]Izyaslav prepared, and
with the sons of David sent envoys to Sviatoslav, brother of the late
Igor, reminding him of their treaties.
Sviatoslav gave no answer at first, but guarded the envoys to keep
men away from them. Meanwhile he consulted with Yuri. “Art thou
going against Izyaslav? Tell me truly lest I ruin my lands without
reason.” “I go, of course,” replied Yuri. “My nephew made war in my
lands and set fire to them. He drove out my son, and insulted me. I
will avenge the wrong done, or I will lay down my life.”

On receiving this answer, Sviatoslav, unwilling to break his oath,

without reasons which men might hold sufficient, commanded his
envoys to speak thus to Izyaslav: “Return Igor’s property, and I will
be with thee.” “Thou hast kissed the cross to put aside enmity
because of Igor and his property,” replied Izyaslav, “but now thou
dost mention them when my uncle is marching against me. Keep thy
oath, or else break it.”

Sviatoslav joined forces with Yuri. Yuri and Sviatoslav then sent the
sons of David a message, but they sent the answer only to Yuri: “In
the last war thou didst swear to be with us. But when Izyaslav took
all our lands and burned the towns in them, thou wouldst not come
to us. Because of this we kissed the cross to Izyaslav, and we cannot
jest with salvation.”

Yuri marched southward, expecting the Polovtsi and awaiting

submission from Izyaslav, his nephew. Rostislav of Smolensk, with
large forces, hastened to strengthen his brother. Yuri advanced to
Pereyaslavl, thinking that Izyaslav might yield; but Izyaslav did not
yield. “If my uncle had come with his sons only,” said he, “he might
have had the best province in my possession, but as he leads in the
hated Polovtsi, and with them my enemy, I am forced to the field by
his action.”

Izyaslav talked thus to persuade Kief men to march against Yuri.

They had insisted on peace, and declared that they could not raise
hands against a son of Monomach. But, influenced by Izyaslav’s
words, they at last consented to go, though unwillingly. Crossing the
Dnieper, the Grand Prince met Yuri’s army, the advance troops being
Polovtsi, and repulsed it. Then the two armies stood all day and
night facing each other. In the night Yuri sent to his nephew this
message: “Thou hast ravaged my country, thou hast taken seniority
from me, but spare Christian [75]blood now. Let me seat a son in this
city of Pereyaslavl, and rule thou in Kief. If not, let God judge
between us.”

Izyaslav detained the envoy, and led out all his men to meet Yuri.
Next morning the bishop, with tears in his eyes, begged thus of
Izyaslav: “Make peace with thy uncle. If thou do so, thou wilt save
the land from sore misery, and have great reward from God.” But the
prince would not listen. The armies were face to face that day till
evening, the river Trubej between them. At a council called by
Izyaslav, some favored crossing the river: “God gives thee the
enemy; seize him,” said these men. “Remain where thou art,” said
others. “Thy uncle is wavering, he will vanish in the night. Let him
go, do not touch him.” The first advice pleased the prince, and he
crossed the river. Next day at noon the armies came very near
fighting, but Yuri halted, and in the evening withdrew. Again there
were two minds in Izyaslav’s council: “Thy uncle is fleeing,” urged
one mind; “attack him before he escapes thee.” “Follow not,” urged
the other; “there will be no battle; thou wilt have victory for
nothing.” This time too Izyaslav took the first advice.

At daybreak next morning the battle began. It was resolute at the

opening and venomous on both sides, but soon all of Izyaslav’s
contingents from the Ros River fled. Seeing this, the sons of David
and the Kief men fled also. Pereyaslavl, persuaded already by Yuri’s
son, Rostislav, opened its gates without fighting, and thus the battle
was ended.
Izyaslav had pierced an opposing regiment, but when in the rear of
it he saw that all had deserted him, and knew that nothing save
flight remained. He reached Kief with only two attendants, and went
immediately to Volynia; but he withdrew to reopen the struggle.

On reaching Volynia Izyaslav sent to Poland, Bohemia and Hungary

for aid. Aid was promised, but he wished aid itself, and not promises,
hence he sent envoys a second time bearing rich presents, with the
injunction to get what he asked for. Knowing now what it was to
fight against his uncle when the people were indifferent or opposed
to him, he sent these words to Yuri’s elder brother, Vyatcheslav: “Be
my father and take the throne of Kief; if not I will ruin thy country.”

Vyatcheslav, alarmed by the threat, sent this message to Yuri:

[76]“Make peace, defend my country, come hither thyself; we shall
then see what to do. If thou come not, I must act as seems best to
me.” Yuri set out at once with his troops, taking Polovtsi also.
Izyaslav marched from Volynia against him. To Vyatcheslav came
Rostislav and Andrei, sons of Yuri, and soon Yuri himself came.
Vladimirko of Galitch moved to the boundary and thus checked Poles
and Hungarians.

The Poles, greatly alarmed by news from their own land that
Prussian tribes were attacking them, went home. Hence the allies
sent these words to Yuri and Vyatcheslav: “Though ye are as fathers
to Izyaslav, ye are now warring against him. As Christians and
brethren we should all be united. Can you not arrange peace with
your son and your brother? Ye might remain in Kief. Ye yourselves
know who should be there. Let Volynia and whatever else is his go
to Izyaslav. Let Yuri give back the Novgorod tribute.”

“God reward you,” replied Yuri and his brother. “Since ye ask for
peace and wish well to us, let Izyaslav return to Volynia, and go ye
to your own lands; we will discuss then with Izyaslav.” The allies
withdrew, and the uncles proposed terms to their nephew. But the
affair halted because Yuri’s eldest son and a nephew advised with
great earnestness not to make peace with Izyaslav. Yuri took this
advice all the more readily, since Izyaslav’s allies had gone to their
own lands, and he thought it easy to force down his nephew. “I will
expel Izyaslav and take his lands,” said Yuri, and he moved with his
brother to do this.

Yuri and his forces invested Lutsk, and for many weeks fought
around the city. The besieged lacked water greatly. Izyaslav strove to
aid them, but Vladimirko of Galitch barred the way; he desired
victory for neither side. Volynia, independent of Kief, was what he
wished. Izyaslav sent to him, saying: “Reconcile me with my uncle
Yuri.” Vladimirko was willing, in fact he was very glad to attempt this.

Andrei, Yuri’s second son, was for peace and counseled his father.
“Give no ear to my brother or cousin,” said he. “Make peace, O my
father, do not ruin thy possessions.” Vyatcheslav favored peace also.
He had his own reasons for doing so. “Make peace,” said he to Yuri.
“If not, and thou go, Izyaslav will destroy my country.” [77]

Yuri finally agreed to peace. His nephew yielded Kief, and Yuri gave
back the Novgorod tribute. Izyaslav visited his uncles, and all sides
promised to return booty taken since the action near Pereyaslavl.
After that Yuri went back to Kief, and wished to give it to
Vyatcheslav, to whom it belonged by seniority, but the boyars
dissuaded him. “Thy brother could not hold Kief,” said they. “It will
be neither his nor thine, if thou yield it.” Yuri took his son from
Vyshgorod, and gave the place to Vyatcheslav.

Meanwhile, 1150, Izyaslav sent to find herds and property seized

before peace was concluded, but when his men had found what they
were seeking, and asked for it, Yuri refused it, and they went back
empty-handed. Thereupon Izyaslav sent a complaint and threat to
his uncle: “Keep thy oath, for I cannot remain thus offended.” Yuri
made no answer, and Izyaslav took arms again, urged, as was said,
by Kief people.

At this time Yuri’s son Glaib was encamped not far from Izyaslav,
who suddenly attacked him in the night. Glaib escaped with much
difficulty, having lost everything he had. Next day he sent to his
cousin this message: “Yuri is my father, so art thou, and I render
thee homage. Thou and Yuri will settle all questions. But give thy
oath that thou wilt permit me to visit my father. If thou do, I will
come and bow down to thee.” Izyaslav gave the oath. Glaib went to
Yuri, and Izyaslav hastened to the steppe to get aid from the Black
Caps, who rejoiced with unbounded delight when they saw him.

Yuri, on hearing that his nephew had gone to the Black Caps, left
Kief at once, crossed the Dnieper and hastened to Gorodok. As soon
as Yuri withdrew from Kief, Vyatcheslav entered. The Kief people
went out in great crowds to meet Izyaslav, who was not slow in
coming. “Yuri has left us,” said they. “Vyatcheslav is in the palace,
but we do not want him. Go to Holy Sophia, and then take the
throne of thy fathers.” “I gave thee Kief,” said Izyaslav, in a message
to his uncle, “but thou wouldst not take it. Now when thy brother
has fled, thou art willing. Go to thy Vyshgorod.” “Even shouldst thou
kill me for staying, I would not go,” answered Vyatcheslav.

Taking a few attendants, Izyaslav went to his uncle and bowed down
before him. Vyatcheslav rose, kissed him and they sat down
together. “Father,” said Izyaslav, “I give thee homage, [78]I cannot do
what thou wishest, such is the power of the people. They are
opposed to thee. Go to Vyshgorod; from there we two will manage.”
“When thou didst invite me to Kief,” answered Vyatcheslav, “I had
kissed the cross to Yuri. If Kief is thine now, I will go to Vyshgorod.”
And he went.
Meanwhile Yuri called on the sons of David and Oleg for assistance,
and Vladimirko was marching from the west. Izyaslav, greatly
alarmed, prepared for defense very promptly and went with boyars
to Vyatcheslav in Vyshgorod. “Take Kief,” said he to his uncle, “and
with it what lands thou desirest; the rest leave to me.” Vyatcheslav
was offended at first. “Why didst thou not give me Kief when thou
wert forcing me out of it shamefully?” asked he. “Now when one
army is moving against thee from Galitch and another from
Chernigoff, thou givest me my inheritance.” “I offered thee Kief,
declaring that I could live with thee, but not with Yuri,” said Izyaslav.
“Thee I love as my father. And I say now again: Thou art my father,
and Kief belongs to thee.” These words softened Vyatcheslav and he
kissed the cross to consider Izyaslav as his son, and Izyaslav swore
to regard him as a father. “I am going to Zvenigorod against
Vladimirko,” said Izyaslav. “Be pleased thou to enter Kief and let me
have thy warriors.” “I will send all of my warriors with thee,” replied
Vyatcheslav.

Vladimirko was now in the field to help Yuri, and Izyaslav marched
westward at once to hasten the struggle, but when he came near
the enemy his men forsook him. “Vladimirko has a countless host,”
cried they. “Do not destroy us and forfeit thy own life. Wait till
another time.” “Better die here than suffer disgrace such as that!”
exclaimed Izyaslav. Nevertheless all fled the field, and the Kief prince
was left with only his personal following. He fell back on the capital
safely, though he might have been captured. Vladimirko thought the
whole movement a strategy, hence he followed on cautiously,
looking for ambushes everywhere. Izyaslav found his uncle in Kief,
waiting anxiously. They counseled awhile and then sat down to
dinner. During dinner news came that Yuri was crossing the Dnieper,
and with him the men of Chernigoff. “This is not our day!” exclaimed
the two princes, and they fled from Kief, Vyatcheslav going to
Vyshgorod, and Izyaslav back to Volynia. [79]
Next day Vladimirko and Yuri met outside Kief and greeted each
other on horseback. The Galitch prince visited all the holy places in
the city, and then bade farewell to his father-in-law in friendship. He
took with him Yuri’s son, Mystislav, and installed that prince on the
boundary of Volynia. Later on Yuri gave this whole region to his best
son, Andrei.

Andrei fixed his camp in Peresopnitsa, and during the winter Izyaslav
sent an envoy to him. “Reconcile me with thy father,” said he. “My
inheritance is not in Hungary or Poland. Ask from thy father the
return of my land on the Goryn.” He sent this request, but bade his
envoy look sharply at all things. He was planning to fall on Andrei, as
he had fallen on Glaib, Yuri’s other son, some time earlier.

The envoy found everything in excellent order, and a strong force of

warriors in readiness. Andrei, unsuspicious, or feigning to be so,
turned to Yuri in favor of Izyaslav, but Yuri would not yield a whit to
his nephew. “My uncle,” declared Izyaslav, “would drive me to exile.
Vladimirko of Galitch has taken my land at command of Yuri, and is
now making ready to march on Vladimir, my capital.” So he sent
Vladimir, his brother, to Hungary to ask aid of the king, who marched
straightway with an army on Galitch. “I, thy brother, have started,”
wrote the king. “Join me at once with thy forces. Vladimirko will see
the men whom he has offended.”

Vladimirko had friends in Hungary, who sent him information, hence

he left Bailz, where his camp was, and hastened forward to meet the
Hungarian forces at Peremysl. There he discovered that he was no
match for the king in the field, so he begged the archbishop and two
bishops from Hungary with certain influential boyars to help him. He
lavished gold without stint on these prelates and boyars, and they in
return urged the king to go home and make war at another time. He
yielded, and sent this explanation to Izyaslav: “The Greek Emperor is
moving against me; I must return to my own country to meet him,
but next summer I can send ten thousand men, or even more if thou
need them.”

The Hungarian force vanished, and was as if it had never seen

Galitch. Izyaslav, foiled for the moment by his enemy, sent Vladimir a
second time to Hungary with this message: “Vyatcheslav’s boyars,
the people and the steppe tribes have sent for me. [80]If thou must
stay at home to prepare for the Greek Emperor, send me the aid
which thou hast promised, and I will be with thee hereafter at all
times.” The king sent him now ten thousand men, and with these
warriors he set out against Kief.

On the way news was brought to him that Vladimirko was following.
A council was summoned, and the boyars spoke thus: “Thou art
marching on Yuri, and Vladimirko is pursuing; our position is
perilous.” “Ye have come out of Kief,” replied Izyaslav; “ye have lost
land and property, ye have lost all. I have lost my inheritance. I must
get back my own and win yours in the same effort. If Vladimirko
comes, God will decide between us. If Yuri should meet me, the Lord
will judge also in his case.” And leaving Sviatopolk, one of his
brothers, behind in Vladimir, his capital, to guard the place, he
moved forward with the Hungarians and his own men.

On the way Vladimirko was joined by Andrei, and both forces

followed together. Though sometimes at skirmishing distance,
Izyaslav wisely abstained from action, and sent on Vladimir to
Bailgorod, where Boris, son of Yuri, was feasting. If a collector of
taxes had not raised the bridge, Boris would have been seized at
table. Unable to get possession of the place without a battle,
Vladimir rejoined Izyaslav, and they hastened on toward Kief. When
Vladimirko’s men came up, they approached and sounded a trumpet.
People ran out and lowered the bridge willingly. This advance force
entered Bailgorod, and Boris hurried away to his father. Yuri, greatly
alarmed by the strength of the enemy marching against him, left
Kief at once, crossed the Dnieper, fled on, and took refuge in
Gorodok.

All Kief went out to meet Izyaslav. The delight of the people this
time seemed real. Yuri, whom the city never really liked, had
become most unpopular, and they now rejoiced to be rid of him.

On the west, beyond Bailgorod, Vladimirko and Andrei were

manœuvering for battle with Izyaslav, when suddenly news reached
them that their enemy was in Kief with his forces, and Yuri
powerless in Gorodok. Vladimirko’s rage was unbounded. “I cannot
see how my father-in-law manages,” said he to Andrei. “I cannot
understand how ye, his sons, help him. Thou, Andrei, hadst thy
camp on the Goryn; Boris was in Bailgorod. We might have
[81]forced Izyaslav to action and lamed, or defeated him, but Boris
left us and gave the road to our enemy. Thy father then abandoned
Kief, and Izyaslav is now Grand Prince. To-day the whole Russian
land is on his side. I leave you, and go now to Galitch.”

Yuri had no friends in the south, where all had hoped for his
downfall. The campaign seemed indeed like some folk-tale. A battle
might have ruined Izyaslav; a quick march secured him dominion.

Vladimirko turned home, but to each town he said as he came to it:

“Give me the silver and gold that I ask of you. If ye refuse I will take
what I find at the sword’s point.” No town or city had the silver or
gold, or the coin or utensils to meet this demand of Yuri’s ally, hence
people were forced to take every ornament from the necks and the
arms of their women, and give them to the master of Galitch.
Vladimirko took from all in this way till he reached his own boundary.
At last the hour of triumph had sounded for Yuri’s simple-minded
brother. On the day after his entrance to Kief, Izyaslav sent this
message to his uncle: “I salute thee, my father. I have sinned before
thee, but I repent. I have sinned a first, and a second, and a third
time. I repent now of all these transgressions, and, if thou forgive,
God will pardon me. I give thee Kief; come thou and sit on the
throne of thy fathers.” Thus Izyaslav acknowledged completely the
right of uncles as opposed to the sons of their elder brothers, a right
against which even personal qualities, or the respect of people
availed not.

“God give thee strength, my son,” replied Vyatcheslav, “because thou

hast given me due honor. It was thy duty thus to act long ago. Thou
hast given honor to God by the honor given me. Thou sayest that I
am thy father; I say that thou art my son. I have no son, and thou
hast no father; thou art my son, thou art also my brother.”

Uncle and nephew now kissed the cross to each other not to part in
defeat or in triumph. The Hungarians were feasted, received rich
presents, and went home. The two princes sent Izyaslav’s son on a
mission to Hungary, to assure the Hungarian king of the Kief princes’
gratitude, and to make offer of service, asking, too, that if the need
came the king would send troops, as he had sent them recently.
Rostislav of Smolensk was invited to aid in liberating [82]Kief, for they
thought, and thought rightly, that Yuri would not yield without a
struggle.

Yuri now summoned all his allies. Sviatoslav moved promptly and
met Vladimir, son of David, in Chernigoff; then their forces sailed
down in boats to Gorodok, where they joined Yuri. Izyaslav, the
other son of David, joined the Kief princes. Rostislav of Smolensk
came to Kief early with his forces. Yuri moved with his allies from
Gorodok to the Dnieper and strove hard to cross, but was foiled in
each effort by his nephew. Strengthened now by large forces of the
Polovtsi, he marched toward the south and crossed at the second
ford, below Kief, then turning back, he advanced on the capital.
Izyaslav and his uncle, disposing their men in the city and around it,
waited for the coming conflict.

“We are now ready for battle,” said Vyatcheslav to his nephews.
“Yuri is my brother, though younger, and I wish to bring my seniority
before him. God in his judgment considers the right side.” So he
summoned an envoy and gave these instructions: “Go thou to Yuri,
my brother: bow down to him in my name and say these words from
me: ‘I have said often to thee, Yuri, and to Izyaslav, shed not
Christian blood, ruin not the Russian land. I have tried to restrain
thee from war. I have regiments and power of my own which God
gave me. Still I have not fought for myself, though thou, Yuri, and
also Izyaslav have deeply offended me, not one time, but many.
Izyaslav, when going to fight against Igor, said that he was not
seeking Kief for himself, but for me, his father. Then, when God gave
him victory, he kept Kief for himself, and took also Turoff and Pinsk
from me. That is how Izyaslav offended, but I, keeping Christians in
mind and the Russian land, did not remember it against him. Thou,
brother Yuri, when going to Pereyaslavl to fight against Izyaslav,
didst say: “I seek not Kief for myself. I have an older brother who is
to me as a father; I am seeking Kief for that brother.” But, when God
aided thee to take Kief, thou didst keep it. Thou didst seize from me,
besides, Dorogobuj and Peresopnitsa, and gavest me only
Vyshgorod. Thus did ye wrong me. All this time I sought no redress
out of love for the Russian land and for Christians. Ye would take no
decision of mine; ye sought war. I strove to dissuade thee from war,
but ye would not listen. Thy answer was that thou couldst not give
homage to a junior. But Izyaslav, though he has failed [83]twice
before in his word to me, has given now what is mine; he has
yielded up Kief, and calls me father. Thou hast said: “I cannot bow
down to a junior.” I am older than thou not a little; I was bearded
before thou wert born. If it is thy wish to defy my seniority, God will
render judgment.’ ”

To this Yuri answered: “I bow down to thee, brother; thy words are
true, and well spoken. Thou art to me in the place of a father, and if
it is thy desire to arrange matters clearly, let Izyaslav go to Volynia
and Rostislav return to Smolensk. I will settle all questions then with
thee.” “Brother Yuri, this is what I will say in answer,” retorted
Vyacheslav. “Thou hast seven sons, and I do not hunt them away
from thee. I have two adopted sons, Izyaslav and Rostislav, with
some others still younger. I will add this: Do thou for the good of the
Russian land and of Christians go to Pereyaslavl, thence to Kursk
with thy sons, and beyond is Rostoff, thy great inheritance. Send
home the sons of Oleg. After that we will settle, and shed no
Christian blood. But if thou must have thy own way, the Purest Lady
and her Son will judge between us.”

Yuri gave no answer to these words, but next morning he appeared

before Kief with his forces. There was nothing but skirmishing till
toward evening, when a part of each army engaged. The Kief troops
drove back their opponents, and fought with such vigor that Yuri
withdrew his whole force and marched westward to meet Vladimirko,
his ally from Galitch, who, as he heard, was now hastening to join
him. He appeared before Bailgorod, from which his son Boris had
fled some time previously, and summoning the citizens, said: “Ye are
my people, open the gates to me.” “Has Kief opened its gates?” was
the answer. The gates remained closed, and Yuri marched farther.
The Kief princes set out in pursuit and overtook him near Rut River,
beyond Bailgorod. There they strove again to make peace, but
failed, since the sons of Oleg and the Polovtsi opposed it.
As they could not come to terms, the Kief princes were anxious to
force a battle before Vladimirko could strengthen their enemy. Yuri
wished to defer the engagement till Vladimirko could join him. His
first intention was to pass Rut River, prevent the Kief troops from
crossing, and wait for his ally in a favorable position. But all his
movements to gain time were useless, and he was compelled [84]to
turn promptly to battle. Andrei, now Yuri’s eldest son, for Rostislav
had died recently, ranged his father’s warriors in order of battle.
“Thou hast striven much for the good,” said Izyaslav and his brother
to Vyatcheslav, “but thy brother opposes at all times. We are willing,
if need be, to lay down our lives to save thy rights for thee.” “My
sons,” replied the old man, “I have been opposed all my life to
bloodshed. We are on this field to-day because of Yuri. God will
judge between him and me.”

Andrei advanced in the front rank, led the battle, and made the first
lance cast. His lance broke, his shield was torn from him, his helmet
was shivered, and he fell from the horse, which was wounded under
him. Izyaslav also engaged in the front rank; thrown from his horse,
he fell and was lost among the slain and wounded.

The battle was brief, but decisive. Izyaslav’s men fought willingly this
time, while Yuri’s showed no heart in the struggle. His Polovtsi fled
without using an arrow. After them fled the sons of Oleg, and next
Yuri himself and his sons. Many prisoners were taken, many men
slain. Among the slain was Vladimir, son of David, Prince of
Chernigoff.

When the victors, returning, passed over the field after hunting their
fugitive opponents, they saw a man trying to rise from a great pile of
dead and wounded. Some foot warriors ran up and struck him. “I am
a prince!” he was able to say. “Thou art the man we are seeking,”
cried they, and slashed at his helmet, thinking him a son of Oleg, or
David. “I am Izyaslav. I am your prince,” called he to them. They
raised him then with gladness, and praised the Lord, who had saved
him.

The Kief princes urged Izyaslav, son of David, to take his brother’s
corpse, hasten with all the strength in him to Chernigoff, and sit on
the throne before Sviatoslav could forestall him. (This was a real
case of running for office.)

From the battlefield Yuri fled to the Dnieper, which he crossed, and
then sped forward to Pereyaslavl for refuge. Sviatoslav fled to
Gorodok, but as the son of Oleg was enormous in person, and
mortally weary from fighting and fleeing, he could not move farther,
though eager to do so. If he had had wings and could have used
them, he would have flown through the air to Chernigoff; as it was,
he sent forward his nephew, son of Vsevolod, who learned [85]at the
Desna that Izyaslav, son of David, was already on the throne.
Vladimirko of Galitch, on hearing of his father-in-law’s defeat,
hastened homeward.

At last Vyatcheslav and his nephew were in safety on all sides. They
returned to Kief, which they entered in triumph, and held the place
with pleasure, at least for the moment.

Vladimirko of Galitch now dealt a sore blow at his enemies. Having

heard that Mystislav, son of Izyaslav the Kief prince, was bringing in
Hungarians, he lay in wait to destroy them. He found means to place
a great quantity of wine within reach of the foreigners and they
seized it and had a rich feast that evening. Just before daybreak
Vladimirko attacked and slew nearly all of them, reserving but few
for captivity. Mystislav escaped with his personal attendants. “If God
give health to the king, and to me,” said Izyaslav, when he heard of
the slaughter, “Vladimirko will pay for this dearly.”
Yuri, still in Pereyaslavl, was inciting Vladimirko, and collecting fresh
Polovtsi, so the Kief princes marched to expel him. After fighting two
days before the town, on the third they burned its outskirts and sent
these words to Yuri: “We salute thee. Go thou to Suzdal. Leave a son
in Pereyaslavl. We may not leave thee there; thou wouldst bring in
Polovtsi.” Yuri could get no aid from Vladimirko or the Polovtsi. His
own forces were greatly decreased, and he would not weaken
Suzdal, hence he returned this answer: “I will march to Gorodok,
remain there a time, and go afterward to Suzdal.” To this the reply
was that he might remain one month in Gorodok, and then he must
go to Suzdal. If he would not agree to this, they would attack
Gorodok, as they had attacked Pereyaslavl. There was no escape
now, so, though unwilling, Yuri and his son kissed the cross to go in
one month to Suzdal. He promised also to make no attack on Kief
while it was held by Izyaslav and his uncle, and his uncle made no
treaty with Sviatoslav, son of Oleg.

Leaving his son Glaib in Pereyaslavl, Yuri went to Gorodok. Andrei,

his eldest son, begged to go in advance to Suzdal. “We have naught
now in this place,” said he to his father. Sviatoslav, hearing that Yuri
had agreed with Vyatcheslav and his nephew, sent to Izyaslav, son
of David, in his own name and in that of Sviatoslav, son of Vsevolod,
asking for what had belonged to their [86]fathers. Izyaslav gave
those lands to them, but on condition of their leaving Yuri, and
acting with the sons of Mystislav.

Yuri had not the heart to go home with defeat, and when the month
had passed, and the time came to go to Suzdal he broke his oath
and remained in Gorodok. Izyaslav with his warriors, the Prince of
Chernigoff with his men, also the son of Vsevolod promptly moved
against him. The son of Oleg sent his forces, but would not appear
himself against his old ally. Yuri shut himself up in the place and
fought, but at last he grew weary; he could not win victory alone,
and no help was visible on any side. He was forced finally to swear
again that he would go back to Suzdal. He went this time, and left
his son Glaib in Gorodok. Because of the Gorodok oath breaking,
Pereyaslavl had been taken from Glaib, and given to Mystislav, son
of the Grand Prince.

On the way home, Yuri stopped to see his friend Sviatoslav, son of
Oleg, who received him with honor and gave him things needed for
his journey. This friendly visit caused, very likely, the meeting
between the princes of Kief and Chernigoff in 1152 (Sviatoslav, son
of Vsevolod, was present at this meeting), at which they decided to
deprive Yuri of his foothold between the South and Chernigoff. Then
they razed Gorodok, fired the ruins and consumed the place utterly.
They left not one thing on the site of it.

“Yuri sighed from his heart,” as the chronicler states, when he heard
of this destruction, and began at once to rally his forces. Rostislav of
Ryazan came with his brother; Sviatoslav, son of Oleg, broke his
treaty with the Kief prince and came to aid Yuri. A great host of
Polovtsi appeared from all hordes between the Don and the Volga.
An immense army assembled. “They burned my Gorodok,” said Yuri,
“and also the church in it. I will burn their cities in return.” And he
marched on Chernigoff.

The Kief prince sent this message at once to his brother in

Smolensk: “If Yuri moves against thy land, I will hasten to aid thee.
If he passes thee, do thou hurry hither with warriors.” Rostislav saw
that Yuri, when passing Smolensk lands, would strike at Chernigoff,
so marching with speed he reached Chernigoff before his uncle, and
shut himself in there with Sviatoslav, son of Vsevolod. Polovtsi
legions appeared that same day, and fell straightway to burning the
suburbs.
Yuri himself with his allies came in sight the next morning. [87]Twelve
days and nights did the Suzdal prince struggle with the city but the
defense was so stubborn that he seized nothing, mastered no part of
Chernigoff. On the thirteenth morning came news that Vyatcheslav
and Izyaslav were hurriedly approaching with all the Kief forces. The
Polovtsi, active at looting and burning, fled when they saw that real
fighting and danger were near them, and Yuri was forced to
withdraw. He went first to Novgorod, then to Rylsk, and was about
to start for Suzdal when the son of Oleg reproached him as follows:
“Thou art leaving me when thou hast ruined my property. All the
grain in this land has been trampled by Polovtsi. Thy Polovtsi have
fled, and thou thyself art deserting. After thee will come Izyaslav,
and he will destroy what remains here because I broke faith with
him, and gave thee assistance.” Yuri engaged to leave troops, but his
words were merely vain promises. He left only fifty men of his
guard, and Vassilko, his son, to protect all that country.

At Novgorod appeared Izyaslav, with his allies. In three days he was

master of all save the innermost fortress. Sviatoslav, son of Oleg,
asked then for peace, which the Kief prince wished at first to refuse,
but he granted it finally and returned to Chernigoff. There he
received news from his son, Mystislav, that he had overtaken and
crushed Yuri’s Polovtsi, freed a great number of captives and
recovered much booty. Yuri made still another effort, but a weaker
one and his defeat was decisive.

Thus ended Izyaslav’s struggle with his uncle. Yuri’s main ally,
Sviatoslav, was reduced to take gladly the place that was given him.
There remained still another of Yuri’s assistants, the last one, his
son-in-law, Vladimirko of Galitch, and to him Izyaslav now turned his
attention. [88]
[Contents]
CHAPTER IV
 ANDREI BOGOLYUBOFF
In 1151 the Kief prince and King Geiza of Hungary attacked
Vladimirko near Peremysl, where, though hemmed in by the armies,
he managed to escape to the town with a single attendant. He
informed the king straightway, that, mortally wounded and dying, he
begged him for peace and forgiveness. He sent also, through
agents, great presents and bribes to Geiza’s attendants and to the
archbishop. “Let me not die without peace or pardon,” implored he.
“Great is my sin, but forgive me.”

Notwithstanding all protests from Izyaslav, peace and pardon were

granted, Vladimirko promising to return the towns seized from
Izyaslav, and to be his ally, both in defeat and in triumph. Vladimirko
was lying in bed, as if mortally wounded, and seemed to dread his
last hour, then approaching.

When King Geiza was sending officials with a cross, which the dying
man was to kiss, Izyaslav objected with anger. “That man jests with
every oath,” said he. “It is vain to send a cross to Vladimirko.” “This
is the very wood on which died Christ our Lord,” explained Geiza. “By
God’s will it came to Saint Stephen, my ancestor. If Vladimirko kisses
this cross, survives, and breaks his oath, I will lay down my life, or
capture Galitch and give it to thee. I cannot kill a man on his death-
bed.”

Izyaslav yielded, but Mystislav, his son, who was present, added
these words: “He will break the oath surely, and I repeat here before
this holy cross, forget not thy word, O King of Hungary, but come
again with thy warriors to Galitch, and do what thou hast promised.”
“If Vladimirko breaks his oath,” replied Geiza, “I will ask thy father to
help me in Galitch, as he has asked me up to this time.” Vladimirko
kissed the cross to do all that he had promised. [89]

On his way home Izyaslav sent posadniks to take possession of the

towns which were to be returned to him. These men came back
quickly with news that not one town had been given to them—one
half of the oath was now broken. On learning that Yuri was marching
against Izyaslav, Vladimirko at once sent troops to help Yuri, and
thus broke the rest of his oath. He returned home only when the
Grand Prince was marching against him a second time.

Izyaslav sent Borislavitch, his boyar, who had witnessed the oath on
the holy cross of Saint Stephen, to demand the towns promised.
“Say to Izyaslav,” said the Galitch prince, “that he attacked me
unawares and perfidiously, that he brought a foreign king with him,
and that I will either lay down my life, or avenge the wrong done
me.” “But, thou hast taken an oath to the king and to Izyaslav,” said
the boyar. “Wilt thou foreswear the cross?” “Oh, that little cross!”
retorted Vladimirko. “Though that cross be small it is mighty,” said
the boyar. “Men have told thee that Christ the Lord died on that
wood, and that thou wouldst not live if thy promises were broken.
Dost remember?” “I remember that ye spoke many words to me
then, but leave this place now and go back to thy Izyaslav.”

While the boyar was leaving the courtyard, Vladimirko started for
vespers, but halted to ridicule him. When, on his way back from the
church, the prince reached the spot where he had stood to revile
Borislavitch, he call out on a sudden: “Some one has struck me on
the shoulder!” He could not move his legs, and would have fallen
had men not seized him. He was borne to his chambers and placed
at once in a hot bath, but he grew rapidly worse, and died that same
night.
Borislavitch, who had passed the night at a village by the wayside,
was roused hurriedly next morning at daybreak, and bidden to wait
till the prince should recall him. Some hours later a second message
came, asking him to return. When he reappeared at Vladimirko’s
palace, servants clothed in black came out to meet him. In the chief
seat was Yaroslav, son of Vladimirko, dressed in black; his boyars
also were in black, every man of them. Yaroslav burst into tears as
he looked at the envoy, who learned at once how Vladimirko had
died in the night, though in perfect health a few hours earlier. “God
has shown his will,” [90]said Yaroslav; “thou art called back to hear
these words from me. Go thou to Izyaslav, bow down to him and say
from me: ‘God has taken my father, be thou in his place. There were
questions between thee and him, those questions the Lord will judge
as he pleases. God has taken my father and left me here in place of
him. His warriors and attendants are all at my order. I salute thee, O
father, receive me as thou dost Mystislav, thy son. Let him ride at
one of thy stirrups, and I with my forces will ride at the other.’ ”

The boyar went home with this message, which seems to have been
sent to win time and lull Izyaslav, for no towns were returned, and
all things remained as they had been.

Hence, in 1153, the Grand Prince again moved against Galitch. The
two forces met at Terebovl, but the battle was strangely indecisive
as to victory, though its results were more useful to Yaroslav than to
the Grand Prince. One part of the Kief force defeated one part of
Yaroslav’s army, while the other part of those forces was badly
beaten and pursued by the Galitch men. Izyaslav, impetuous as
usual, broke the ranks of his opponents and drove them far from the
first place of onset, but his brothers and allies were beaten, and
hopelessly scattered.
Izyaslav, having no forces with which to continue the struggle,
returned to Kief and abandoned all plans against Galitch. Some
months later he married a Georgian princess, and died shortly after,
1154. Kief and the south mourned greatly for this prince, and most
of all mourned Vyatcheslav his uncle. “Thou art where I ought to be,
but against God all are powerless,” sobbed the old man, bending
over the coffin.

If in Kief men were saddened by this death, they rejoiced in

Chernigoff immensely. Izyaslav, son of David, who yearned for Kief
as a man yearns for her of whom he is desperately enamoured, set
out for the city at once, but was stopped at the Dnieper by
Vyatcheslav, who sent this inquiry: “Why hast thou come? Who has
called thee? Go back to thy Chernigoff.” “I wish to weep over my
cousin. I was far from him when he died. Let me weep at his coffin,”
implored Izyaslav. By the advice of the boyars, and the son of the
dead prince, this request was rejected. They dared not trust the son
of David, and were waiting impatiently for Rostislav to take the place
of his brother. [91]

Prompt action was taken meanwhile to divide the Chernigoff cousins.

Vyatcheslav sent for Sviatoslav, son of Vsevolod, who came at once,
without knowledge of his uncle’s death. The Smolensk prince
appeared at the earliest moment, and all felt relieved when Rostislav
sat in the place of his brother, as a son and subordinate of
Vyatcheslav, the Grand Prince, though really commanding. “Act,” said
the Kief men, “as did thy brother, and Kief will be thine till thy death
hour.”

The first act of Rostislav was a settlement with Sviatoslav, son of

Vsevolod. “I give thee Turoff and Pinsk,” said he to this nephew,
“because thou didst come to my father, I give thee good lands for
that act of thine.” Sviatoslav took this large gift with gladness. There
was need to attach him firmly, since his uncles of Chernigoff were
treating already with Yuri, whose son Glaib was now marching on
Pereyaslavl with a strong force of Polovtsi. Rostislav sent his son
straightway to that city with assistance. The Polovtsi had attacked,
but at sight of Kief warriors they withdrew beyond the Sula.
Rostislav resolved then to march on Chernigoff, and crossing the
Dnieper he was ready to move forward when a courier galloped up
with the message: “Vyatcheslav, thy uncle, is dead!”

After the prince had been interred with great honor, Rostislav went
back to the army and held a council: “Return to the capital,” said the
Kief boyars, who wished to be sure of the offices. “Settle there with
the people, and begin to rule anew well supported. If Yuri comes,
make peace or war, as need dictates.” Rostislav did not take their
advice, but moved on Chernigoff, sending this message first to
Izyaslav, son of David: “Wilt thou kiss the cross to reign in
Chernigoff, while I am in Kief?” “I know not what I have done to
make thee march against me. If thou come, we shall have that
which God gives,” was the answer.

But this far-seeing son of David had sent Polovtsi under Glaib to
Pereyaslavl, and was in fact warring at that time with Rostislav. He
now joined Glaib with great promptness. Rostislav, finding no zeal in
Kief boyars, and thinking himself outnumbered and powerless, lost
courage, and discussed terms of peace with the son of David. Such
indecision roused Mystislav, son of the recent Grand Prince, who left
his uncle with these words: “Soon neither thou nor I will have any
place.” Rostislav, deserted by his nephew, [92]and outflanked by the
Polovtsi, fought two days, and then fled, saving his life with much
difficulty. The Polovtsi turned now toward Kief, which they
threatened. “I wish to go to you,” was the message sent by Izyaslav
to Kief citizens. The capital was helpless, Izyaslav was the one man
to save it. “Come thou to Kief, lest the Polovtsi take us. Thou art our
prince, come at once,” was the quick answer.

Izyaslav needed no second call. He appeared, took the throne of

Kief, and sent Glaib, son of Yuri, to Pereyaslavl. When Yuri heard
that Izyaslav, his nephew, was dead, and that Rostislav, his other
nephew, was in Kief, he set out with strong forces immediately, and
was nearing Smolensk, for which he intended the first blow, when
he learned that Vyatcheslav, his brother, was dead; that Rostislav
was defeated, that Izyaslav, son of David, was reigning in Kief, and
Glaib his own son, was prince in Pereyaslavl.

Rostislav, who had reached Smolensk and had collected men, was
marching to meet Yuri. Each now wished peace with the other. Yuri
was hastening to Kief, which he coveted beyond everything else.
Rostislav, who had no desire at that juncture for Kief, was glad to
agree with his uncle, and they made peace with apparent sincerity.
Yuri continued his march toward Kief, and Rostislav retired to his
own capital. Near Storodub, Yuri met his old ally, Sviatoslav, son of
Oleg, with whom was Vsevolod’s son, Sviatoslav, who appeared now
with a prayer for reinstatement. “In days past I lost my mind
altogether. Forgive me.” These were his words to Yuri. The son of
Oleg interceded, and Yuri gave pardon, making Sviatoslav kiss the
cross not to desert either him, or the son of Oleg. All three set out
then for Chernigoff.

Before reaching that city the son of Oleg sent the Kief prince this
message: “Go out of Kief, brother, Yuri is marching against thee.”
Izyaslav was unwilling to leave Kief. A second message came, but he
took no note of it. Thereupon Yuri sent these words: “Kief is my
inheritance, not thine.” Without right, and without the special favor
of the people, Izyaslav could not remain, so he answered: “I am
here not of my own will; the Kief people sent for me. Kief is thine,