Corporate Accounting and Financial Management · Accounting for Share Capital

Calls in Arrears and Calls in Advance: Journal Entries and Interest

Updated 11 October 2026 · Fact-checked

Calls in arrears is call money due but not paid by a shareholder. Calls in advance is call money received before it is called. Arrears are deducted from called-up capital. Advance is a liability. Table F only sets ceilings of 10% p.a. on arrears and 12% p.a. on advance, so use the rate the question gives.

Understand Calls in Arrears and Calls in Advance

A company usually collects the price of a share in instalments: application, allotment and one or more calls. Some shareholders do not pay on the due date. Others pay more than has been asked for.

Calls in arrears is the amount that has been called but remains unpaid after the due date. The shareholder owes it to the company. It is not an asset to show separately. It is deducted from the called-up capital in the notes to the balance sheet, so the balance sheet shows only what has actually been received.

Calls in advance is the amount a shareholder pays on a share before the call is made. The company owes it back until the call is made, so it is a liability and not part of share capital. It is adjusted against the call when that call is made.

The Companies Act, 2013 does not fix the interest rate on either. The company's articles decide it. The model articles, Table F (Schedule I), set maximum rates only. The board may charge interest on arrears at a rate not exceeding 10% p.a., and may pay interest on advance at a rate not exceeding 12% p.a. These are ceilings, not fixed or default rates. The board can also waive interest on arrears. Interest on advance is paid only for the period from receipt to the due date of the call. It is a finance charge to the Profit and Loss account.

The Table F rates are not part of the section text this page is built on, so confirm the exact clauses in Schedule I and your ICSI study material.

In exam questions, the rate usually comes with the question. Use that rate. If the question gives no rate, do not assume one. Charge or allow interest only as the question directs. Table F governs a company only where it has not registered its own articles or where its articles adopt it.

Key rules to remember

Calls in arrears: Calls in arrears = Amount called due − Amount actually received; Shown as a deduction from called-up capital. Not a separate asset.
Interest on calls in arrears: Interest = Arrears × Rate ÷ 100 × Months ÷ 12; Rate = the rate given in the question. Table F only sets a ceiling of 10% p.a., so do not assume a rate if none is given. Count from the due date to the date of payment, or to the year end if still unpaid. Credited to the Interest on Calls in Arrears account (income).
Interest on calls in advance: Interest = Advance × Rate ÷ 100 × Months ÷ 12; Rate = the rate given in the question. Table F only sets a ceiling of 12% p.a., so do not assume a rate if none is given. Count from the date of receipt to the date the call is due. Debited to the Profit and Loss account.
Entry for arrears: Calls in Arrears A/c Dr. To Share Call A/c; Optional: many questions skip this account and leave the call account open.
Entry for advance: Bank A/c Dr. To Calls in Advance A/c; later, Calls in Advance A/c Dr. To Share Call A/c; Calls in advance is a liability until adjusted.

How to solve Calls in Arrears and Calls in Advance questions

Use the same method for any question on arrears or advance. Work from the called-up amount to the cash actually received.

1List each call with its amount per share and due date. Note the rate of interest given in the question. If none is given, do not assume one.
2For each shareholder, work out the amount due and the amount paid on that date.
3If paid less than due, record the shortfall as calls in arrears. If paid more, record the excess as calls in advance.
4Pass the cash entry: Bank Dr. To Share Call A/c, with the amount actually received. Add a separate credit to Calls in Advance A/c for any excess.
5Calculate interest with the rate and the exact time period. Arrears: from due date. Advance: from receipt to due date.
6Pass interest entries. Arrears: Bank or Shareholder Dr. To Interest on Calls in Arrears. Advance: Interest on Calls in Advance Dr. To Bank (and TDS if applicable).
7Show share capital in the balance sheet note. Called-up less calls in arrears is shown as paid-up capital. Calls in advance goes under other current liabilities.

Quickest way: Three-line check for arrears and advance

When to use it: Use this when time is short and the question asks for entries or the balance sheet extract.

Write the call due, then the cash received. The gap is arrears (if received is less) or advance (if received is more).
Interest arrears: Arrears × rate × time, from due date. Interest advance: Advance × rate × time, to due date. Never mix the two start points.
Balance sheet: show called-up capital, deduct calls in arrears, and put calls in advance as a liability. Do not add advance to capital.

Common mistakes in Calls in Arrears and Calls in Advance

Treating calls in advance as part of share capital.
The money came from shareholders, so it feels like capital.
Fix: Remember that it is a liability until the call is made. Show it under other current liabilities.
Counting interest on advance up to the year end or the date of allotment.
Students copy the arrears method without checking the dates.
Fix: Interest on advance runs only from the date of receipt to the date the call is due.
Using 12% for arrears and 10% for advance.
The two Table F ceilings are easy to swap.
Fix: Arrears: up to 10% p.a. Advance: up to 12% p.a. Both are ceilings under Table F, not fixed rates. Use the rate the question gives. If it gives none, do not assume one.
Showing calls in arrears as an asset on the balance sheet.
The shareholder owes the money, so it looks like a receivable.
Fix: Deduct it from called-up capital so that only the amount received appears as paid-up capital.
Charging interest on arrears for the whole year.
Students forget to start from the due date.
Fix: Count only the months or days from the due date to payment or the balance sheet date.
Debiting interest on advance to the Share Call account.
It is linked to the call in the question.
Fix: It is a finance cost. Debit Interest on Calls in Advance or the Profit and Loss account.

Worked examples

Example 1

Gamma Ltd issued 10,000 equity shares of ₹10 each at par. ₹4 was payable on application and allotment, and ₹6 on the first and final call, due on 1 July 2026. Mr Rao, holding 200 shares, did not pay the call. He paid it on 1 October 2026. The board charges interest on arrears at 10% p.a., which is within the Table F ceiling. Calculate the interest due from Mr Rao and give the entries for his non-payment and his payment.

Show the solution

Call due on Mr Rao's shares = 200 × ₹6 = ₹1,200.
Entry for the unpaid call (the arrears entry, passed first): Calls in Arrears A/c Dr. ₹1,200; To Share First and Final Call A/c ₹1,200.
Rate on arrears = 10% p.a. (given in the question). Period = 1 July to 1 October 2026 = 3 months.
Interest = 1,200 × 10 ÷ 100 × 3 ÷ 12 = ₹30.
Entry on payment of call and interest: Bank A/c Dr. ₹1,230; To Calls in Arrears A/c ₹1,200; To Interest on Calls in Arrears A/c ₹30.

Answer: Interest due from Mr Rao is ₹30. Total received on 1 October 2026 is ₹1,230.

Example 2

Delta Ltd made a final call of ₹5 per share on 5,000 shares, due on 31 March 2027. Mr Iyer, holding 400 shares, paid the final call on 1 January 2027, ahead of the due date. The board allows interest on calls paid in advance at 12% p.a., which is within the Table F ceiling. Show the entries and the interest payable to Mr Iyer.

Show the solution

Amount received in advance = 400 × ₹5 = ₹2,000.
Entry on 1 January 2027: Bank A/c Dr. ₹2,000; To Calls in Advance A/c ₹2,000.
Rate on advance = 12% p.a. (given in the question). Period = 1 January to 31 March 2027 = 3 months.
Interest = 2,000 × 12 ÷ 100 × 3 ÷ 12 = ₹60.
On 31 March 2027, adjust the advance: Calls in Advance A/c Dr. ₹2,000; To Share Final Call A/c ₹2,000.
Interest entry: Interest on Calls in Advance A/c Dr. ₹60; To Mr Iyer (or Bank) ₹60.

Answer: Interest payable to Mr Iyer is ₹60. Calls in advance of ₹2,000 is adjusted against the final call on 31 March 2027.

Exam tips

Read the articles and rate in the question and use the rate given. If no rate is given, charge no interest unless the question directs you to.
Write the period of interest clearly in months. Examiners give marks for the working.
If asked for the balance sheet extract, show calls in arrears as a deduction from called-up capital and calls in advance as a separate liability.
Learn the difference in a short table form in your answer: nature, treatment in balance sheet, Table F ceiling and interest direction.
Mention that Table F is the model set of articles, that it gives only maximum rates, and that a company's own articles can fix different rates.

Practice questions from Accounting for Share Capital

Calls in Arrears and Calls in Advance: frequently asked questions

What is the difference between calls in arrears and calls in advance?

Calls in arrears is money called but not paid by the due date. Calls in advance is money paid before it is called. Arrears reduce paid-up capital. Advance is a liability until the call is made.

What interest does Table F allow on calls in advance?

Table F lets the board pay interest on calls in advance at a rate not exceeding 12% p.a., if the shareholder pays the amount before it is due. This is a ceiling, not a fixed rate. In a problem, use the rate the question gives. Check the clause in Schedule I and your ICSI material.

Is interest on calls in arrears compulsory?

No. Under Table F the board may charge interest at a rate not exceeding 10% p.a., and may also waive it. If the question does not give a rate or ask for interest, do not charge it.

Where do calls in arrears appear in the balance sheet?

They are deducted from the called-up share capital in the notes. This shows paid-up capital at the amount actually received.