Calls-in-Arrears and Calls-in-Advance

Not every shareholder pays exactly on time, and the Companies Act — through Table F, the model set of Articles of Association in Schedule I — provides for both possibilities: a shareholder paying late, and a shareholder paying early.

Calls-in-Arrears. When a shareholder fails to pay a call (or part of it) by the due date, the unpaid amount is called Calls-in-Arrears. It represents called-up capital that has not yet been paid up, and it is shown as a deduction from called-up capital in the Balance Sheet (paid-up capital = called-up capital − calls-in-arrears).

Journal entry, at the time the call is made and only partly received:

If the company's Articles permit charging interest on such arrears — Table F allows a rate not exceeding 10% p.a., unless the company's own Articles state otherwise — the interest is recorded when it is actually received:

Calls-in-Advance. The opposite situation: a shareholder pays, along with an earlier instalment, an amount that is not yet due — e.g., paying the Second and Final Call money at the same time as the First Call. Since this amount does not belong to a call not yet made, it cannot be credited to Share Capital yet; it is credited to a separate Calls-in-Advance Account:

When the relevant call is later actually made, the Calls-in-Advance Account is adjusted against it (instead of the shareholder paying again), and the company may allow interest on the amount held in advance — Table F permits a rate not exceeding 12% p.a., unless the Articles state otherwise:

The key distinction, side by side.