Calls-in-Arrears

If some amount, called in respect of a share, is not paid before or on the specific date fixed for payment, such amount which is not paid, is called “Calls-in-arrears”. Such amount may be called up by the Company either as Allotment Money or Call Money. In case, any default on account of not paying the call money is known as “ call in arrears ”.

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Call in Arrears

When calls are made upon shares allotted, there is a liability of shareholders holding the shares to pay the call money within the date fixed for such payment.

If any shareholder makes a default in paying the call money within the appointed date, the amount which is not paid, called Calls-in-Arrear.

The interest is chargeable on Calls-in-Arrear according to the provisions in this regard in the Articles of the company.

If the Articles are silent, Table F will be applicable which provides that if a sum called in respect of shares is not paid before or on the day appointed for payment then person who failed to pay shall pay interest thereon.

Interest shall be chargeable from the appointed date to the time of actual payment at a rate not exceeding 10% per annum.

The directors have the right to waive the Amount of interest on Calls-in-Arrear. The interest on Calls-on-Arrear Account is transferred to the P&L Account at the end of the year.

 

Browse more Topics under Introduction To Company Accounts

• Basic Concepts of Company Accounts
• Issue of Shares for Cash
• Issue of Shares for Consideration
• Under and Over Subscription
• Calls-in-Advance
• Issue of Shares to Promoters
• Forfeiture of Shares
• Reissue of Shares
• Issue of Debentures
• Issue of Debentures as Security
• Issue of Preference Shares
• Capital Redemption Reserve Account

 Journal Entries

Date	Particulars		Amount(Dr.)	Amount(Cr.)
(i) For call money in arrear	Calls-in-Arrear A/c	Dr.
	To Relevant Call A/c
	(Being recording of the calls in arrears)
(ii) For receipt of the amount of Calls-in-Arrear with interest, on a subsequent date	Bank	Dr.
	To Calls-in-Arrears A/c
	To Interest on Calls-in-Arrear
	(Being receipt of the call amount)

Solved Example For You

On 1st January 2017, New Royal Ltd. issued 2,00,000 equity shares of 10 each payable as follows:

Application               3

Allotment                 2

1st Call                     2 (Payable after 2 months, from allotment date)

Final Call                  3 (Payable after 2 months from the date of 1st call)

The company receives applications on 15th January 2018 for 2,40,000 shares and makes allotment on 1^st February 2017.

It allows applicants for 100,000 shares in full, those for 120,000 shares, 100,000 shares and rejects applications for 20,000 shares.

Balance amount due on allotment received on 15th February. The company duly makes the calls on 1st March 2017 and 1st April 2017 respectively.

One shareholder did not pay the 1st call money on 6,000 shares which he paid with the final call together with interest at 5% p.a.

Another shareholder holding 2,000 shares did not pay the final call money till the end of the accounting year which ended on 31st March 2018. Show cash book the Journal Entries.

Ans:

Journal Entries

Date	Particulars		Amount(Dr.)	Amount(Cr.)
2018
01 Feb	Equity Share Application A/c	Dr.	600000	600000
	To Equity Share Capital A/c
	(Being the transfer of application money on 2,00,000 shares@ 3 per share to share capital account)
01 Feb	Equity Share Allotment A/c	Dr.	400000
	To Equity Share Capital A/c			400000
	(Being the amount due on allotment of 2,00,000 shares @ 2 per share)
01 Feb	Equity Share Application A/c	Dr.	60000	60000
	To Share Allotment A/c
	(Being the transfer of excess application money)
01 Mar	Equity Share 1st Call A/c	Dr.	400000
	To Equity Share Capital A/c			400000
	(Being the 1st call amount due on 2,00,000 shares @ 2 per share)
01 Apr	Calls-in-Arrear A/c	Dr.	12000
	To Equity Share 1st Call A/c			12000
	(Being the transfer of 1st call money on 6,000 equity shares @  2 per share)
01 Apr	Equity Share Final Call A/c	Dr.	600000
	To Equity Share Capital A/c			600000
	(Being the final call amount due on 2,00,000 shares @ 3 per share)
01 May	Calls-in-Arrear A/c	Dr.	12000
	To Equity Share Final Call A/c			12000
	(Being the transfer of final call money on 4,000 equity shares@ 3 per share)
2019
31 Mar	Sundry Shareholders A/c	Dr.	400
	To Interest on Calls-in-Arrears A/c			400
	(Being the interest due on 12,000 @5% for eight months)

Cash book (Bank Column)

Date	Particulars	Amount		Date	Particulars	Amount
2018				2018
15 Jan	To Equity Share Application A/c	720000		1 Feb	By Equity Share Application A/c	60000
15 Feb	To Equity Share Allotment A/c	240000		1 May	By balance c/d	1988050
01 Apr	To Equity Share 1st call A/c	388000
01 May	To Equity Share Final A/c	588000
01 May	To calls in arrears A/c	12000
01 May	To interest on calls in arrears A/c	50
		2048050				2048050