Calls-in-Arrears and Calls-in-Advance
Calls-in-Arrears
When any shareholder fails to pay the amount due on allotment or on any of the calls, such amount is known as ‘Calls-in-Arrears’/‘Unpaid Calls’. Interest at a rate 10% shall have to be paid on Calls-in-arrears for the period from the day fixed for payment and the time of actual payment thereon. If nothing is specified, there is no need to take the interest on calls-in-arrears account.
( Calculation of Interest on calls-in-arrears is not in syllabus now)
Journal entries in respect of Calls-in-arrears can be shown as:
| No. | Transaction | Journal Entry | Amount |
| 1. | Calls- in-arrears brought into account. | Calls- in- Arrear A/c Dr. To Share Allotment A/c | The allotment/ call money not received. |
| 2. | On making the interest due. | Shareholder A/c Dr. To interest on Calls-in-Arrear | The amount of interest due. |
Calls in Advance
Sometimes some shareholders pay a part or the whole of the amount of the calls not yet made. The amount so received from the shareholders is known as “Calls in Advance”. The amount received in advance is a liability of the company and should be credited to ‘Call-in-Advance Account.”
The amount received will be adjusted towards the payment of calls as and when they become due. Table A of the Companies Act provides for the payment of interest on calls in advance at a rate of 12% per annum.
( Calculation of Interest on calls-in-arrears is not in syllabus now)
Journal entries in respect of Calls in advance can be shown as:
| No. | Transaction | Journal Entry | Amount |
| 1. | On receiving money in advance. | Bank A/c Dr. To Calls in Advance A/c | The amount of calls in advance received. |
| 2. | On adjustment of the advance. | Calls in Advance A/c Dr. To Relevant call A/c | The amount adjusted on call becoming due. |
Calls-in-Arrears and Calls-in-Advance