Calls In Arrears – A First Look

Think of buying something on instalments. You order a phone for ₹30,000, pay ₹10,000 now, and promise to pay ₹10,000 next month and ₹10,000 the month after. If you miss the second instalment, you still owe that ₹10,000. That unpaid amount is exactly what Calls In Arrears means in the world of company accounts.

A company issues shares, and shareholders pay for them in stages: Application, Allotment, and then one or more Calls. If a shareholder fails to pay any of these amounts on the due date, that unpaid sum is called Calls In Arrears.

Why It Matters

The company needs that money to run its business. More importantly, the company has a legal right to recover it. The shareholder remains liable. The company can also charge interest on calls in arrears at the rate specified in the Articles of Association (usually 8–12% per annum). If the shareholder still doesn't pay, the company may eventually forfeit the shares.

Accounting Treatment – The Journal Entry

When a shareholder does not pay a call amount, the company does not simply ignore it. It records the amount as a receivable. The rule is:

Debit Calls In Arrears Account (a personal account representing the amount due from shareholders)

Credit the respective Call Account (Share Allotment A/c, Share First Call A/c, etc.)

The journal entry looks like this:

Later, when the shareholder pays the arrears, the entry is reversed:

Where It Appears in the Balance Sheet

The Calls In Arrears account is not an expense. It is a deduction from the Subscribed Capital on the Equity and Liabilities side of the Balance Sheet. The NCERT textbook shows it like this:

Here is the exact format as per NCERT (Chapter: Accounting for Share Capital):

Note 1 – Share Capital:

Interest on Calls in Arrears …