Calls-in-Advance
generally arises when there is an over subscription of shares. Here, the excess
application money received is adjusted against the amount due on allotment or
calls. The excess application money after adjustment for allotment should be transferred
to a special account called ‘Calls-in-Advance Account’, if the prospectus so provides.
Sometimes, to avoid the botheration of paying calls from time to time, some
shareholders may prefer to pay the entire amount at the time of allotment. In such
a situation, the advance money in respect of future calls should also be transferred
to Calls-in-Advance Account and it is adjusted when calls are made.
Interest may be
provided if company authorise
The accounting entries:
- For transferring excess application money
Share Application
Account (Debit) - (adjustment for excess)
To Calls-in-Advance Account
(Credit)
- For money received in advance against call
Bank Account (debit)
To Calls-in-Advance Account
(Credit)
- For adjusting with call
Calls-in-Advance
Account (Debit)
To Call(s) Account
