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

Ravi Industries Ltd received Rs 6,000 from a shareholder as a payment towards a call not yet made, in respect of 1,000 shares. Which statement correctly describes the accounting treatment at the time of receipt?

The Rs 6,000 is credited to Calls in Advance and shown as a liability until the call is made. When the call becomes due, the amount is transferred to the call account and adjusted against the amount payable, so it is not share capital at receipt.

  1. AThe amount is credited to Calls in Advance and shown as a liability until the call becomes dueCorrect
  2. BThe amount is credited to Share Capital immediately as called-up capital
  3. CThe amount is credited to Securities Premium
  4. DThe amount is credited to the Statement of Profit and Loss as other income

Explanation

Money received before a call is due is Calls in Advance. It is credited to that account and is a liability until the call is made, when it is adjusted against the call account. Crediting share capital before the call is made would overstate called-up capital, and premium or income treatment is unsupported.

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