Limited Companies:Subscription of Shares By Installment: Call In Arrears

This article deals with a limited company which has issued shares by installment and whereby the shares are called up and the shares applicants are informed to settle their installments on shares but the company has not being able to collect payment on the due date.

The accounting entries are shown and an illustration being given for clearer understanding.

Subscription of Shares By Installment: Call In Arrears

Accounting entries as follows:

Step 1:

Debit: Bank Account

Credit: Application and Allotment Account

[ Total application & allotments being fully paid]

Step 2:

Debit :Bank Account

Credit: 1st and 2nd Call Account

[ Being actual payment made on first and second call]

Step 3:

Debit: Call In Arrears Account

Credit: 1st and 2nd Call Account

[ Being amount still not be paid to the company taken up into an offset/contra account to be deduced from share capital in the Balance Sheet]

Step 4:

Debit: Application & Allotment Account

Debit: First & Second Call Account

Credit: Ordinary Share Capital

[ Being application, allotment and first and second call being taken up into Ordinary Share capital}

Illustration:

Question:

Company XYZ Ltd issued shares on installment. All applicant had paid up their shares at application and allotment stage. During the first and second calls there are 2,000 shares which are unable to pay the call payments.

Assume the following:

100,000 shares at $1 each being issued at par value

Application-pay $0.20 of each share

Allotment-pay $0.40 of each share

First and Second call – pay $0.20 of each share

Suggested Solution:

Bank Account

	Debit($)		Credit($)
Application & Allotment	60,000
1^st & 2^nd Call	19,600	Balance c/d	79,600
	79,600		79,600

Application & Allotment Account

	Debit($)		Credit($)
Ordinary Share Capital	60,000	Bank	60,000

	60,000		60,000

First And Second Call Account

	Debit($)		Credit($)
Ordinary Share Capital	20,000	Call in Arrears	400
		Bank	19,600
	20,000		20,000

Call In Arrears Account

	Debit($)		Credit($)
First & Second Arrears	400	Balance c/d	400
	400		400

Ordinary Share Capital Account

	Debit($)		Credit($)
Balance c/d	80,000	Application & Allotment,	60,000
		First & Second Call	20,000
	80,000		80,000

Balance Sheet XYZ Ltd

Share Capital:

100,000 Ordinary Shares $0.80 each $80,000

Less: Call In Arrears 400

$79,600

Workings:

Application share paid=100,000 x $0.20 = $20,000

Allotment share paid =100,000 x $0.40 =$40,000

$60,000

Actual payment made on First & Second Call

=(100,0000-2,000)x$0.20 =$19,600

Call In Arrears = 2,000 x$0.20 = $400

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