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Some shareholders pay a part or whole of the amount not yet called-up by the company. Such an amount is referred to as calls-in-advance.

The company may pay interest on such advances only if its Articles of Association authorize it to do so. However, if the articles remain silent, then the company, as per Table A, shall pay interest at a rate not exceeding 6 per cent p.a.


Since the amount is received in advance, it is a liability of the company and is shown in the liabilities side of the balance sheet under the head ‘Share Capital’ (but is not added to the amount of paid-up capital) or ‘Current Liabilities’.

The amount received as calls-in-advance is not entitled to any dividend.

The journal entries for calls-in-advance are as follows:

Illustration 5


A Ltd. makes an issue of 10,000 equity shares of ₹ 10 each payable as:

  • On application: ₹ 3
  • On allotment: ₹ 3
  • On first and final call: ₹ 4 (3 months after allotment)

Applications are received for 13,000 shares and the directors made allotment in full to the applicants demanding five or more shares and returned money to the applicants for 3,000 shares. One shareholder, who was allotted 200 shares, paid the first and final call with allotment money and another shareholder did not pay allotment money on his 300 shares, but which he paid with the first and final call. The directors decided to charge and allow interest, as the case may be, according to the provisions of Table A. Journalize the transactions including cash transactions.



Journal Entries in the Books of A Ltd.


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