Calls in Arrears and Calls in Advance

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on June 22, 2021

Calls in Arrears – Definition

If any amount, called in respect of a share, is not paid before or on the date fixed for payment thereof, such amount which is not paid, is called “Calls in Arrears“.


The amount may be called by the Company either as Allotment Money or Call Money. Thus, in case, any default on account of not sending the call money is known as  “Calls in Arrears” and separate account i.e. Calls in Arrears account to be opened. The Company can charge interest on all such calls in arrears for the period the amount remain unpaid at the rate of 5% p.a. The total of Calls in Arrears is shown in the Balance Sheet as a deduction from the Called up Capital.

Calls in Advance – Definition

The money received by the Company in excess of what has been called up is known as “Calls in Advance“.


A Company may, if authorised by its Articles, accept calls in advance from its shareholders. If such an amount, which has not been called, is received, such amount to be credited to a separate account known as Calls Advance Account. But this amount, which is not called, should not be credited to Capital Account. A company may pay interest on such amount received in advance at the rate of 6% p.a. No dividend is payable on this amount. The amount so received will be adjusted towards the payment of calls as and when they become due.

Illustration (Calls in Arrears and Calls in Advance)

United Limited was registered with a Nominal Capital of $5,00,000 in shares of $100 each, 3,000 of which were issued for subscription, payable as to $12.50 on application; $12.50 on the allotment and $25 three months after the allotment and the balance to be called up as and when required. All money up to allotment was duly received, but as regards the call of $25, a shareholder holding 100 shares did not pay the amount due. Another shareholder who was allotted 150 shares paid the entire amount of the shares.
Show the necessary journal entries to record the above transactions (including cash) and show how these appear in the Balance Sheet.


Journal entries


Balance Sheet


Illustration 2

X Limited makes an issue of 20,000 Equity Shares of $10 each at $11 on 1st March payable follows:

  • $2 on Application
  • $3 on Allotment
  • $6 on First and Final Call (3 months after allotment)

Applications were received for 26,000 shares. The Directors made the allotment in full to the Applications demanding 10 or more shares and returned the money to applications for 6,000 shares.
One shareholder who was allotted 40 shares paid the first and final call money along with allotment money and another shareholder who was allotted 60 shares did not pay allotment money but paid along with first and final call money. The Directors decided to charge and allow interest, as the case may be, on calls in advance and call in arrears.
Give journal entries in the books of Company.


Journal Entries


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