Page 28 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Unit 1: Share Capital – Issue of Shares

Accounting Treatment Notes

Though there is no requirement to open calls-in-arrear account separately and generally
call-in-arrear account is not opened– yet some companies open this account and pass the following
journal entry:
Call-in-arrear account Dr. (for unpaid amount)
To Relevant Call Account
And when the amount of calls in arrear is received.

Bank Account Dr.
To Call-in-Arrear Account
If there is any balance for calls-in-arrear account, it is shown by the way of deduction from the
called up capital in the balance sheet.

Calls-In-Advance

When any applicant pays more amount than the amount due from him, this excess amount is
known as call-in-advance. A company may, if so authorised by its Articles of Association, accept
calls-in-advance from its shareholders. If there is a provision in the Articles of Association of a
company, the Board of Directors must pay interest on call-in-advance at a rate specified in the
articles of association from the date of its receipt to the date when the call became due. But if the
Articles are silent at this point, Table A(18) shall be applicable, which provides the option to
board of directors to pay interest on calls-in-advance at a rate not exceeding 6% per annum.
Accounting Treatment

Calls-in-advance is shown in the liability side of the balance sheet separately from paid up
capital. Calls-in-advance are not entitled for any dividend declared by the company. The
accounting journal entries relating to calls-in-advance are as follows:
When amount of calls in advance is received:
Bank Account Dr.
To Call-in-advance account

When the relevant call is received:
Calls-in-advance account Dr.
To relevant call account

Example 6: The authorised capital of Bhatia Limited is 200,000 shares of 10 each. On
April 20, 2006. 1,00,000 shares are issued for subscription at a premium of 20%. The share money
is payable as follows:
5 including premium with application
3 on allotment

2 on first call
2 on second and final call.

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