Calls in Arrears
When shareholder(s) cannot pay due amount on due date, it is called calls in arrears.
It may be on allotment, first call or second and final call.
There is never arrears in application.
According to Company Act, the company should send writing notice or letter to shareholders about calls in arrears.
Reason for calls in arrears may be as under:
· Shareholders does not have money to pay
· He/she does not want to the money
· He/she has not received calls letter.
Journal entry for calls in arrear
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Due |
Amount due or receivable |
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Equity share allotment or calls account |
Dr |
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xxxx |
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To Equity share capital account |
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xxxx |
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(Being- amount due on allotment or calls) |
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Received |
Amount received on allotment or calls |
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Bank account |
Dr |
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xxxx |
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Calls in arrear account |
Dr |
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xxxx |
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To Equity share allotment or calls account |
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xxxx |
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(Being- amount received on allotment or calls) |
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Keep In Mind (KIM)
1. There are no calls in arrears on application |
2. Calls in arrears is debited/adjusted with received entry viz with bank |
3. Calls in arrears is deducted from issued capital in balance sheet, liabilities side |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = ₦ = Birr = Currency of your country
PROBLEM: 7A
MK Company Ltd has authorized capital 1,00,000 equity shares @ $/₹/Rs 100. The Company issued 60,000 equity shares at $110 per share. Amount payable as under:
On application $30
On allotment $35
On first call $20
On final call $15
All the shares were issued, called and paid up. The entire amount was duly received except a shareholder who held 2,000 shares failed to pay allotment and calls.
Required: (a) Journal entries; (b) Balance sheet
[Answer: Calls in Arrears 70,000; 40,000; 30,000; Balance sheet = $64,20,000]
SOLUTION
If question indicates to arrear on final call, arrear only on final call,
If question indicates to arrear on first call, arrears on first call and final call,
If question indicates to arrear on allotment, arrears on allotment, first call and final call,
Call in arrear is never possible on application.
If question indicates to arrears on final call, arrear only on final call
Shares Issued |
Issued Price |
Installation |
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Arrears and Advance |
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Share Applied |
Shares Allotted |
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100 + 10P |
Application |
30 |
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60,000 |
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Allotment |
35 [25C+10P] |
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First call |
20 |
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Final call |
15 |
−2,000 |
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C is capital and P is premium
If question indicates to arrears on first call, arrears on first call and final call
Shares Issued |
Issued Price |
Installation |
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Arrears and Advance |
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Share Applied |
Shares Allotted |
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100 + 10P |
Application |
30 |
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60,000 |
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Allotment |
35 [25C+10P] |
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First call |
20 |
−2,000 |
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Final call |
15 |
−2,000 |
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C is capital and P is premium
If question indicates to arrears on allotment, arrears on allotment, first call and final call
Shares Issued |
Issued Price |
Installation |
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Arrears and Advance |
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Share Applied |
Shares Allotted |
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100 + 10P |
Application |
30 |
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60,000 |
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Allotment |
35 [25C+10P] |
−2,000 |
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First call |
20 |
−2,000 |
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Final call |
15 |
−2,000 |
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C is capital and P is premium
Again, according to question
Calls in arrears on allotment = 2,000 shares x $35 = 70,000a
Calls in arrears on first call = 2,000 shares x $20 = 40,000b
Calls in arrears on final call = 2,000 shares x $15 = 30,000c
Journal Entries
In the book of MK Company Ltd
Date |
Particulars |
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LF |
Amount |
Amount |
Received |
Amount received on application |
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Bank account |
Dr |
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18,00,000 |
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To Equity share application account |
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18,00,000 |
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(Being- amount received on 60,000 shares @ $30) |
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Transfer |
Amount transfer of application |
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Equity share application account |
Dr |
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18,00,000 |
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To Equity share capital account |
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18,00,000 |
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(Being- amount transfer of application to capital account) |
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Due |
Amount due/receivable on allotment |
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Equity share allotment account |
Dr |
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21,00,000 |
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To Equity share capital account |
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15,00,000 |
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To Equity share premium (security premium) |
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6,00,000 |
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(Being- amount due/receivable on allotment and premium adjusted) |
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Received |
Amount received on allotment |
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Bank account (b/f) |
Dr |
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20,30,000 |
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Calls in arrear account (2,000 shares @ $35) |
Dr |
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70,000a |
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To Equity share allotment account |
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21,00,000 |
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(Being- amount received on 60,000 – 2,000 = 58,000 |
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shares @ $35 and arrear adjusted) |
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Due |
Amount due/receivable on first call |
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Equity share first call account |
Dr |
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To Equity share capital account |
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12,00,000 |
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(Being- amount due/ receivable on calls) |
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12,00,000 |
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Received |
Amount received on first call |
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Bank account (b/f) |
Dr |
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11,60,000 |
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Calls in arrear A/c (2,000 shares @ $20) |
Dr |
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40,000b |
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To Equity share first call account |
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12,00,000 |
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(Being- amount received on 60,000 – 2,000 |
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= 58,000 shares @ $20 and arrear adjusted) |
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Due |
Amount due/receivable on final call |
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Equity share second and final call account |
Dr |
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9,00,000 |
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To Equity share capital account |
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9,00,000 |
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(Being- amount due/ receivable on calls) |
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Received |
Amount received on final call |
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Bank account (b/f) |
Dr |
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8,70,000 |
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Calls in arrear A/c (2,000 shares @ $15) |
Dr |
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30,000c |
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To Equity share second and final call account |
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9,00,000 |
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(Being- amount received on 60,000 – 2,000 |
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= 58,000 shares @ $15 and arrear adjusted) |
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Balance Sheet
MK Company Ltd
Liabilities |
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Amount |
Assets |
Amount |
Authorized capital: |
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– |
Bank balance (b/f) |
64,20,000 |
100,000 equity share @ $100 |
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1,00,00,000 |
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Issued and paid up capital: |
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– |
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60,000 equity shares @ $100 |
60,00,000 |
– |
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Less: Calls in arrears |
(140,000) |
58,60,000 |
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Share or security premium |
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5,80,000 |
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64,20,000 |
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64,20,000 |
Calls in arrear = 70,000 + 40,000 + 30,000 = 140,000
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Share (Accounting for Share) |
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Share in Nepali |
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Debentures |
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Final Account: Class 12 |
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Final Account in Nepali |
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Work Sheet |
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Ratio Analysis (Accounting Ratio) |
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Fund Flow Statement |
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Cash Flow Statement |
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Theory Accounting Xii |
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Theory: Cost Accounting |
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Cost Accounting |
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LIFO−FIFO |
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Cost Sheet, Unit Costing |
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Cost Reconciliation Statement |
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Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = ₦ = Birr = Currency of your country
PROBLEM: 7B
EP Company Ltd has authorized capital 30,000 common stocks of $/₹/Rs 50. The company issued 20,000 stocks at par. The amount was payable $20 on application, $10 on allotment and $10 on first and $10 on final call.
The amounts were received as follows:
On 15,000 stocks full called up amount
On next 2,000 stocks $40 per stock
On next 1,500 stocks $30 per stock
On first 1,500 stocks $20 per stock
Required: (a) Journal entries; (b) Balance sheet
[Answer: Calls in Arrears $15,000; $30,000; $50,000; Balance sheet = $9,05,000]
SOLUTION
On 1,500 stocks, the company received $20 per stock; here, amount received on application but arrears on allotment and calls.
On 1,500 stocks, the company received $30 per stock; here, amount received on application and allotment but arrears on calls.
On 2,000 stocks, the company received $40 per stock; here, amount received on application, allotment and first call but arrears on final call.
Given and working note:
Shares Issued |
Issued Price |
Installation |
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Arrears and Advance |
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Share Applied |
Shares Allotted |
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50 |
Application |
20 |
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20,000 |
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Allotment |
10 |
−1,500 |
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First call |
10 |
−1,500−1,500 |
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Final call |
10 |
−1,500−1,500−2,000 |
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Again, according to question
Calls in arrears on allotment = 1,500 shares x $10 = 15,000x
Calls in arrears on first call = 3,000 shares x $10 = 30,000y
Calls in arrears on final call = 5,000 shares x $10 = 50,000z
Journal Entries
In the book of EP Company Ltd
Date |
Particulars |
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LF |
Amount |
Amount |
Received |
Amount received on application |
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Bank account |
Dr |
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4,00,000 |
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To Common stock application account |
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4,00,000 |
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(Being- amount received on 20,000 stocks @ $20) |
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Transfer |
Amount transfer of application |
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Common stock application account |
Dr |
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4,00,000 |
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To Common stock capital account |
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4,00,000 |
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(Being- amount transfer of application to capital account) |
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Due |
Amount due/receivable on allotment |
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Common stock allotment account |
Dr |
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2,00,000 |
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To Common stock capital account |
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2,00,000 |
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(Being- amount due/receivable on allotment) |
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Received |
Amount received on allotment |
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Bank account (b/f) |
Dr |
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1,85,000 |
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Calls in arrear account (1,500 stocks @ $10) |
Dr |
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15,000x |
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To Common stock allotment account |
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2,00,000 |
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(Being- amount received on 20,000 – 1,500 = 18,500 |
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stocks @ $10 and arrear adjusted) |
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Due |
Amount due/receivable on first call |
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Common stock first call account |
Dr |
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To Common stock capital account |
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2,00,000 |
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(Being- amount due/ receivable on calls) |
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2,00,000 |
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Received |
Amount received on first call |
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Bank account (b/f) |
Dr |
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1,70,000 |
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Calls in arrear A/c (3000 stocks @ $10) |
Dr |
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30,000y |
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To Common stock first call account |
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2,00,000 |
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(Being- amount received on 20,000 – 3,000 |
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= 17,000 stocks @ $10 and arrear adjusted) |
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Due |
Amount due/receivable on final call |
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Common stock second and final call account |
Dr |
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2,00,000 |
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To Common stock capital account |
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2,00,000 |
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(Being- amount due/ receivable on calls) |
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Received |
Amount received on final call |
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Bank account (b/f) |
Dr |
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1,50,000 |
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Calls in arrear A/c (5,000 stocks @ $10) |
Dr |
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50,000z |
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To Common stock second and final call account |
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2,00,000 |
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(Being- amount received on 20,000 – 5,000 |
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= 15,000 stocks @ $10 and arrear adjusted) |
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Balance Sheet
EP Company Ltd
Liabilities |
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Amount |
Assets |
Amount |
Authorized capital: |
|
– |
Bank balance (b/f or total) |
9,05,000 |
30,000 common stock @ $50 |
|
15,00,000 |
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Issued and paid up capital: |
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– |
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20,000 common stocks @ $50 |
10,00,000 |
– |
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Less: Calls in arrears |
(95,000) |
9,05,000 |
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9,05,000 |
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9,05,000 |
Calls in arrear = 15,000 + 30,000 + 50,000 = 95,000
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PROBLEMS AND ANSWERS |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = ₦ = Birr = Currency of your country
Problem: 7A [calls in arrears]
Birgunj Flour Mills Limited issued 10,000 equity shares of $100 each. The amount was payable $30 on application, $30 on allotment and $40 on first and final call. All the shares were applied and allotted. The entire amount was received except a shareholder Mr. Thapa, who held 200 shares failed to pay first and final call.
Required: Journal entries
[Calls in arrears $8,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = ₦ = Birr = Currency of your country
Problem: 7B [calls in arrears]
Butwal Corporation Limited issued 15,000 equity shares of $100 each at $110. The amount was payable:
$30 on application
$45 on allotment
$35 on first and final call
All the shares were applied and allotted. The entire amount was received except a shareholder Mr. Sharma, who held 500 shares failed to pay allotment and call.
Required: Journal entries
[Answer: Calls in arrear: on allotment = $22,500; On F&F call = $17,500
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = ₦ = Birr = Currency of your country
Problem: 7C [calls in arrears]
ABC Food Product Limited, registered with nominal capital of $15,00,000 divided into $100 per share, issued 8,000 shares to public at 10% premium payable as under:
On application $50 per share
On allotment $40 per share
On first and final call $20 per share
The amounts received on these shares were as follows:
On 7,200 shares full amount
On 600 shares $90 per share
On 200 shares $50 per share
Required: (a) Journal entries; (b) Balance sheet
[Answer: Calls in Arrears $8,000; $16,000; Balance sheet = $7,76,000]
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