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 arrear in application.
According to Company Act, the company should send writing notice or letter to shareholders about calls in arrears.
The company may charge 5% p.a. interest on calls in arrears according to time period.
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
Date |
Particulars |
|
LF |
Amount Dr |
Amount Cr |
Due |
Amount due or receivable |
|
|
|
|
|
Equity share allotment account |
Dr |
|
xxxx |
|
|
To Equity share capital account |
|
|
|
xxxx |
|
(Being- amount due on allotment) |
|
|
|
|
|
|
|
|
|
|
Received |
Amount received on allotment |
|
|
|
|
|
Bank account |
Dr |
|
xxxx |
|
|
Calls in arrear account |
Dr |
|
xxxx |
|
|
To Equity share allotment account |
|
|
|
xxxx |
|
(Being- amount received on allotment) |
|
|
|
|
|
|
|
|
|
|
Due |
Amount due or receivable |
|
|
|
|
|
Equity share allotment account |
Dr |
|
xxxx |
|
|
To Equity share capital account |
|
|
|
xxxx |
|
(Being- amount due on allotment or calls) |
|
|
|
|
|
|
|
|
|
|
Received |
Amount received on calls |
|
|
|
|
|
Bank account |
Dr |
|
xxxx |
|
|
Calls in arrear account |
Dr |
|
xxxx |
|
|
To Equity share calls account |
|
|
|
xxxx |
|
(Being- amount received on calls) |
|
|
|
|
|
|
|
|
|
|
Interest charged on calls in arrears
Date |
Particulars |
|
LF |
Amount Dr |
Amount Cr |
|
Bank account |
Dr |
|
xxxx |
|
|
To Interest on calls in arrear account |
|
|
|
xxxx |
|
(Being-interest received on calls in arrears) |
|
|
|
|
|
|
|
|
|
|
When a shareholder pays due amount before calling is calls in advance.
According to Company Act, shareholders can get 6% p.a. interest on calls in advance if it is mentioned on memorandum of association.
Shareholder can get dividend of calls in arrears shares if Articles of Association mentions.
Reason for calls in advance may be as under:
· Shareholder wants to get interest.
· He has to go out-of-station for long time.
· May be, in future he cannot pay due amount within time etc.
Calls in advance first time credited
Date |
Particulars |
|
LF |
Amount Dr |
Amount Cr |
Received |
Amount received on allotment |
|
|
|
|
|
Bank account |
Dr |
|
xxxx |
|
|
To Equity share allotment account |
|
|
|
xxxx |
|
To Calls in advance account (on first and final call combined) |
|
|
|
xxxx |
|
(Being- |
|
|
|
|
|
|
|
|
|
|
Calls in advance second time debited
Received |
Amount received on first call |
|
|
|
|
|
Bank account |
Dr |
|
xxxx |
|
|
Calls in advance account (on first call) |
Dr |
|
xxxx |
|
|
To Equity share first call account |
|
|
|
xxxx |
|
(Being- |
|
|
|
|
|
|
|
|
|
|
Calls in advance second time debited
Received |
Amount received on final call |
|
|
|
|
|
Bank account |
Dr |
|
xxxx |
|
|
Calls in advance account (on final call) |
Dr |
|
xxxx |
|
|
To Equity share final call account |
|
|
|
xxxx |
|
(Being- |
|
|
|
|
|
|
|
|
|
|
Interest paid on calls in advance
|
Interest on calls in advance account |
Dr |
|
xxxx |
|
|
To Bank account |
|
|
|
xxxx |
|
(Being-interest paid on calls in advance) |
|
|
|
|
|
|
|
|
|
|
Interest paid and transfer to profit and loss account
|
Profit and loss account |
Dr |
|
xxxx |
|
|
To Interest on calls in advance account |
|
|
|
xxxx |
|
(Being-interest paid on calls in advance transfer to |
|
|
|
|
|
Profit and loss account ) |
|
|
|
|
|
|
|
|
|
|
Balance Sheet
Liabilities |
|
Amount |
Assets |
Amount |
Issued and paid up capital: |
|
|
|
|
xxxx Shares @ $xx |
xxxxx |
|
|
|
Less: Calls in arrears |
(xxx) |
xxxxx |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
Calls in advance |
|
|
|
|
|
|
|
|
|
Bases |
Calls in Arrears |
Calls in Advance |
Calls |
Calls in arrears are unpaid amount by shareholders. |
Calls in advance are prepaid amount by shareholders. |
Interest |
Company receives interest on call in arrears. |
Company pays interest on call in advance. |
Interest rate |
Company receives 5% interest on arrears. |
Company pays 6% interest on advance. |
Show |
Company deducts it from issued capital in liabilities side of balance sheet. |
Company shows it on current liabilities of balance sheet. |
Entry |
It is only debited in journal entry with bank transaction. |
It is first credited then debited in journal entries. |
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