Question 3 (11 marks)

The accountant of ABC Limited has prepared the following unadjusted trial balance of ABC Limited on 30^th June 2021.

Yellow Limited

TRIAL BALANCE

AS AT 30^th JUNE 2021

Accounts	Debit ($)	Credit ($)
Cash at bank	13 985
Account receivables	26 200
Prepaid insurance	3 900
Office Supplies	4 680
Office equipment	14 100
Accumulated depreciation - equipment		2 850
Accounts payable		315
Salary payable
Unearned service revenue		1 230
Loan payable		10 500
Capital		33 300
Drawings	60 000
Service revenue		159 270
Salary expenses	66 000
Depreciation expenses - equipment
Miscellaneous expenses	18 600
TOTAL	207 465	207 465

The following additional information is available at the end of June for adjustments:

• Mr Emmanuel is working as the inventory clerk. He performs the physical count of the office supplies on 30^th June 2021. This physical count reveals that the unused office supplies of $550 are on hand.
• The rate of depreciation for the office equipment is 15% per annum and ABC Limited used the straight-line method of depreciation.
• Of the $1230 unearned service revenue, $300 is still unearned
• 60% of prepaid insurance is expired during this period.
• Salaries owed but not yet paid $1920.
• Provided consultancy service of $2000 on credit. This was not recorded for the month.

Required:

1. Prepare adjusting entries at the end of 30 June, 2019. (6 marks)
2. Calculate the balance of the total revenue of the company after adjustment. (2 marks)
3. Explain why accrual accounting adjustments are required? (3 marks)