Calls-in-Advance

When an applicant sends more money than what is called by the company, the excess money is called Calls-in-Advance. The accounting entry passed to record the same is:

Bank A/c                                  Dr
To Calls – in- Advance
(Call amount for ……. shares @ Rs….. received in advance)

According to Section 92 calls-in-advance can be accepted only when a company is so authorised by its Articles. If a company has
adopted Table A normally an interest at 6 % is to be paid on such callsin- advance from the date of receipt till due date. When calls become actually due, calls-in-advance account is adjusted towards the call. The accounting entry passed to record the same is:

Transfer of Calls-in-Advance to particular call

Calls-in-Advance A/c                                    Dr
To Particular Call A/c
(Calls-in-advance transferred to particular call account)

Illustration : 

Somu Ltd. issued to the public 8000 equity shares of Rs.10 each payable as follows.

On Application Rs. 2.50

On Allotment Rs. 4.00

On First Call & Final Call Rs. 3.50

All the shares were subscribed for and all money due were received. Akbar a shareholder who subscribed for 500 shares paid
the call money along with the allotment money. Pass journal entries to record the same.

Solution:

Somu Ltd.
Journal Entries

Date	Particulars		Debit Rs.	Credit Rs.
	Bank A/c                                                                             Dr		20,000
	To Share Capital A/c			20,000
	(Application money received on 8,000 shares @ Rs.2.50 per share )
	Share Application A/c                                                  Dr		20,000
	To Share Capital A/c			20,000
	(Application money transferred to share capital A/c)
	Share Allotment A/c                                                     Dr		32,000
	To Share Capital A/c			32,000
	(Allotment money due on 8,000 share @ Rs.4 per share)
	Bank A/c                                                                             Dr		33,750
	To Share Allotment A/c			32,000
	To Calls-in-advance A/c			1,750
	(Allotment money received with calls in advance)
	Share First & Final call A/c                                         Dr		28,000
	To Share Capital A/c			28,000
	(Call amount due on 8,000 shares @ Rs.3.50 per share)
	Bank A/c                                                                             Dr.		26,250
	Calls-in-advance A/c                                                        Dr.		1,750
	To Share First & Final call A/c			28,000
	(Call money received and calls-in­advance account transferred to call account)