The following trial balance for King Parrot Supplier Ltd has been prepared on 30 June 2020. A number of balance day adjusting entries have been recorded, and the accountant has closed revenue and expense accounts to the Profit & Loss Summary account. The business adopted the perpetual inventory system.

	DR	CR
Accounts receivable	50 000
Accounts payable		36 200
Accrued expenses		3 500
Accumulated depreciation – equipment		230 000
Cash at bank	446 000
Equipment	450 000
Inventory (at cost)	102 500
Land	226 000
Loan		192 000
Office supplies on hand	3450
Prepayments	24 000
Profit & Loss Summary	51 900
Provision for doubtful debts		2000
Retained profits		187 650
Share capital		700 000
Unearned revenue		2 500
	1 353 850	1 353 850

Unfortunately, some items have not been accounted for at all and others have been accounted for incorrectly. Details are as follows:

i      During June 2020 cash of $7 000 was received from a customer and the goods have been provided to the customer, however the transaction has not been recorded. The cost of these goods to the business was $3200.

ii    A bad debt of $1200 needs to be written off and the provision for doubtful debts needs to be adjusted to an amount that is 10% of the accounts receivable balance.

iii    The balance in the prepayments account relates to an annual rent in advance payment made on 31 March 2020. No adjusting entry has been made in relation to this item.

iv    On 30 June 2020 the business received $5 500 from a customer for goods that will not be supplied until July 2020. This transaction has not yet been recorded.

v     Interest is payable on the loan quarterly in arrears, calculated at 5% per annum. The next payment is due on 1 July 2020, and no adjustment has been made yet for this payment.

vi    Office supplies on hand at 30 June 2020 have been counted and estimated to be worth $1100.

Required

1. Prepare general journal entries for any required adjustments, corrections and to complete the closing entries

2. Explain your treatment of the expenditure on office supplies in point vi above.

3. Briefly explain the importance of adjusting entries to the preparation of financial reports. In your answer highlight the main purpose of adjusting entries.