Several years ago your brother opened Magna Appliance Repairs. He made a small initial investment and added money from his personal bank account as needed. He withdrew money for living expenses at irregular inergals as the business grew, he hired an assistant. He is now considering adding more employees, purchasing additional service trucks, and purchasing the building he now rents. To secure funds for the expansion, your brother submitted a loan application to the bank and included most the recent finantial statements (which follow) prepared from accounts maintained by a part-time book keeper.

Magna Appliance Repairs (Income Statment) For the year ended October 31, 2016

Service Revenue: $675,000

Less: Rent Paid $187,200

Wages paid $148,500

Supplies Paid $42,000

Utilities paid $39,000

Insurance paid 21,600

Misc payments $54,600 492,900

Net income 182,100

Magna Appliance Repairs Balance Sheet October 31,2016

Cash $95,400

Amount due from customers $112,500

Truck: 332,100

Total assets: 540,000

Equities

Owners Capital $540,000

After reviewing the financial statements, the loan officer at the bank asked your brother if he used the accurate basis of accounting for revenues and expenses. Your brother responded that he did and that why he included an account for "Amounts Due from Customers". The loan offier then asked whether or not the accounts were adjusted prior to the preparation of the statements. Your brother answered that they had not been adjusted.

a) why do you think the loan officer suspected that the accounts had not been adjusted prior to the preparation of the statments?

b) Indicate possible accounts that might need to be adjusted before an accurate set of financial statements could be prepared.