Question

Money received in advance from shareholders before it is actually called-up by the directors is

• A. Debited to Calls in Advance Account.
• B. Credited to Calls-in-Advance Account.
• C. Debited to Share Capital Account.
• D. Credited to Share Capital Account.

Hint:

Calls in Advance is: \[ \text{a liability of the company} \] hence it is credited.

Answer 1

The Correct Option is B

Sometimes shareholders pay: \[ \text{future call money in advance} \] before it is formally demanded by the company. Such amount is known as: \[ \text{Calls in Advance} \] Since this amount is:
• Received before becoming due
• A liability for the company it is credited to: \[ \text{Calls-in-Advance Account} \] Journal entry: \[ \text{Bank A/c Dr.} \] \[ \text{To Calls-in-Advance A/c} \] Thus: \[ \text{Calls-in-Advance Account is credited} \] Option analysis:
• Option (A): Incorrect
• Option (B): Correct
• Option (C): Incorrect
• Option (D): Incorrect because amount is not yet part of called-up capital Therefore: \[ \boxed{\text{(B)}} \]