Difference between Calls in Arrears and Calls in Advance

The main difference between Calls in Arrears and Calls in Advance are as follows:

Calls in Arrears

If any amount has been called by the company either as allotment or call money and a shareholder has not paid that money, this is known as callas in arrears. One such calls in arrears, if the company directors want and there is a provision in the articles of Association, the company can change interest @ 5 % for the period for which such amount remained in arrear from the shareholders.

Calls in Advance

Similarly, if any call has been made but while paying that call, some shareholders paid the amount of the rest of calls also, then such amount will be called as calls in advantage and will be credited to a separate account known as callas in advance account by passing the flowing entry.

Bank Account Dr
To Calls in Advance (A/c)

Calls in Advance Account is shown on the liabilities side of the Balance Sheet separately from the paid up capital. Generally interest is pain on such calls according to the provision of the Articles of Association but such rate should not exceed 6% per annum. Calls in advance are not entitled for any dividend declared by the company.

Submitted to RB by Vivek Malhotra