Distinguish between Calls-in-Arrears and Calls-in-Advance.

Exercises · Q3

Q. Distinguish between Calls-in-Arrears and Calls-in-Advance.

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Basis	Calls-in-Arrears	Calls-in-Advance
Meaning	The unpaid portion of a call already made, which a shareholder has failed to pay by the due date	Money received from a shareholder for a call that has not yet been made
Nature	A debit balance — amount still receivable by the company	A credit balance — a liability of the company to the shareholder
Shown in Balance Sheet	Deducted from Called-up Capital to arrive at Paid-up Capital	Shown separately, usually under 'Other Current Liabilities'
Interest	Company CHARGES interest from the defaulting shareholder (Table F: up to 10% p.a.)	Company PAYS/ALLOWS interest to the shareholder (Table F: up to 12% p.a.)

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Q. Sameer and Company Limited invited applications for 25,000 Equity shares of ₹ 100 each payable as: ₹ 25 on application ₹ 50 on allotment ₹ 25 on first and final call Applications were received for 30,000 Equity shares and pro-rata allotment were made to all. All the money was duly received except first and final call on 2,500 Equity shares. Enter the above transactions in the books of Sameer and Company Limited.

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Sameer & Co. offered 25,000 equity shares of Rs. 100 (Rs. 25 application + Rs. 50 allotment + Rs. 25 first & final call). Applications for 30,000 shares were allotted pro-rata (ratio 30,000 : 25,000 = 6 : 5). Excess application money of Rs. 1,25,000 is transferred to allotment; the first & final call on 2,500 shares (Rs. 62,500) stays unpaid as Calls-in-Arrears.

Step 1 - Pro-rata and money working

Particulars	Working	Amount Rs.
Application money received	30,000 x 25	7,50,000
Application money on allotted shares	25,000 x 25	6,25,000
Excess adjusted to allotment	7,50,000 - 6,25,000	1,25,000
Allotment due	25,000 x 50	12,50,000
Less: excess adjusted		1,25,000
Allotment received in cash		11,25,000
First & final call due	25,000 x 25	6,25,000
Less: unpaid on 2,500 shares (Calls-in-Arrears)	2,500 x 25	62,500
First & final call received		5,62,500

Step 2 - Journal entries in the books of Sameer and Company Limited

Particulars	Dr. Rs.	Cr. Rs.
Bank A/c ..... Dr.	7,50,000
To Equity Share Application A/c		7,50,000
(Application money on 30,000 shares @ Rs. 25)
Equity Share Application A/c ..... Dr.	7,50,000
To Equity Share Capital A/c		6,25,000
To Equity Share Allotment A/c		1,25,000
(Application money transferred; excess adjusted to allotment)
Equity Share Allotment A/c ..... Dr.	12,50,000
To Equity Share Capital A/c		12,50,000
(Allotment due on 25,000 shares @ Rs. 50)
Bank A/c ..... Dr.	11,25,000

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