Calls in Arrears and Calls in Advance

Calls in Arrears and Calls in Advance

Calls in Arrears refers to that portion of the capital, which has been called up but not yet paid by shareholders. In other words the allotment or call money called by the company but not paid by the shareholder till the last day fixed for payment there of, is called Calls in Arrears. Share Allotment Account and call Accounts will show debit balances equal to the total unpaid amount. Generally, such amount is transferred to special account called Calls in Arrears Account. The main purpose is to close allotment and other call accounts. The entry is

Calls in Arrears Account Dr
To Share Allotment Account
“Share Call Account.

When the money is received from defaulting shareholder the following entry is passed:
Bank Account Dr
To Calls in Arrears Account:

The amount of Calls in Arrears is shown by a way of deduction from the called-up capital in the on Balance Sheet on the liabilities side under the head ‘share capital’. Interest calls in Arrears may be received from share holders, if the Articles of Associate so provide . If the company has adopted ‘Table A then it can charge interest @ 5% pa. from the due date to the date of actual payment.

Calls in Advance arises when there i an oversubscription of shares. The excess application money received is adjusted against the amount due on allotment or calls. Calls in Advance Account is shown separately from the paid-up capital. No dividend is payable on Calls in Advance.


Interest on calls on Advance: A company has to pay interest on calls in advance from the date of receipt of the amount till the date when call is due for payment. The rate of interest is determined by the Articles of Association.

If Articles of Association is silent then provision of Table A will apply which provides for payment of interest on calls in advance at the rate of 6 per cent pa. The entry for Payment on calls in advances is.

Interest on Calls in Advance A/c Dr.
To Bank Account

Interest on calls in advance appears account appears on the asset side of the balance sheet till it is written off.

Capital IQ Interview Questions - Types of Preference Shares

Types of Preference Shares 

1) Cumulative and Non-cumulative Preference Shares: If a company does not earn sufficient profits during a particular year, dividends on preference shares may not be paid for that year. Bur if preference shares are cumulative, such unpaid dividends are treated as arrears and are carried forward to subsequent years. When the company wants to pay any dividend to equity share holders, it must first pay arrears of such dividend to cumulative preference shareholders. If the company goes into liquidation, arrears of dividend are not payable unless they are either declared or articles of association contain express provisions in this regard. A non-cumulative preference shares is that share where the arrears of dividends do not accumulate. If a dividend is not declared in any year then it lapses. Unless otherwise stated, in the AoA, preference shares are cumulative.

Capital IQ Interview Questions 

2) Participating and Non-Participating preference shares
A participating preference share is a share which carries the right of sharing profits left after paying equity and preference dividends at specified rates. A non-participating preference share is that share which does not carry the right of sharing in the surplus after paying specified dividend to equity shareholders, unless otherwise stated in the Articles Preference shares are deemed to be non-participating.

3) Convertible and Non-Convertible preference shares: A convertible preference share is one which can he converted into equity shares. When it cannot be so converted, it is called non-convertible preference shares.

4) Redeemable preference shares: Redeemable preference shares are those which are redeemable within a stipulated period in accordance with the terms of issue. After Amendment made in 1988 such shares must be redeemed within a period of ten years.

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