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CS Executive · Corporate Accounting and Financial Management · Accounting for Share Capital

In the books of a company, how is the amount of a call that has been made and become due, but remains unpaid by some shareholders on the due date, ordinarily treated?

Calls in Arrears is the unpaid call money due from shareholders. It is deducted from called-up capital in the Balance Sheet, because the company has not received it. It is neither a loss to be written off nor a liability, so it is not treated as calls in advance.

  1. AIt is recorded as Calls in Arrears and deducted from Called-up Capital (or shown as a deduction under subscribed capital) in the Balance SheetCorrect
  2. BIt is written off immediately to the Statement of Profit and Loss as a bad debt
  3. CIt is shown as Calls in Advance under current liabilities
  4. DIt is added to Securities Premium until it is realised

Explanation

Unpaid call money is Calls in Arrears. It is not an expense or a liability. It is deducted from the called-up capital so that the Balance Sheet shows only the capital actually received. Treating it as a bad debt or as calls in advance misdescribes an unpaid amount as a loss or as money received.

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