Surya Ltd. issued 50,000 equity shares of Rs. 10 each. The amount was payable as follows : on Application - Rs. 3 per share, on Allotment - Rs. 2 per share, on First and Final Call - the balance. Usha, to whom 700 shares were allotted, paid her entire share money on allotment. Raj, to whom 300 shares were allotted did not pay the first and final call. The amount to be debited to Bank Account for first and final call after it becomes due will be :

Q: Surya Ltd. issued 50,000 equity shares of Rs. 10 each. The amount was payable as follows : on Application - Rs. 3 per share, on Allotment - Rs. 2 per share, on First and Final Call - the balance. Usha, to whom 700 shares were allotted, paid her entire share money on allotment. Raj, to whom 300 shares were allotted did not pay the first and final call. The amount to be debited to Bank Account for first and final call after it becomes due will be :

**Correct option: (C) Rs. 2,45,000** The first and final call (Rs. 5 per share) is due on 50,000 − 700 (Usha's shares, already fully paid as calls-in-advance) − 300 (Raj's shares, in arrears) = 49,000 shares. Cash actually received when the call is made = $49,000 \times \text{Rs. }5$ = **Rs. 2,45,000**.

Accounting for Share Capital

Calls-in-Advance and Calls-in-Arrears

Options

(A)Rs. 2,50,000

(B)Rs. 2,48,500

(C)Rs. 2,45,000

(D)Rs. 2,52,000

Official Answer

Correct option: (C) Rs. 2,45,000

The first and final call (Rs. 5 per share) is due on 50,000 − 700 (Usha's shares, already fully paid as calls-in-advance) − 300 (Raj's shares, in arrears) = 49,000 shares. Cash actually received when the call is made = $49,000 \times \text{Rs. }5$ = Rs. 2,45,000.

calls in advancecalls in arrearsfirst and final callshare capital accountingpro-rata allotmentbank account debited

Marking Scheme

11 mark for correctly computing the first and final call rate as Rs. 5 per share.
21 mark for correctly identifying that both Usha's 700 shares (calls-in-advance) and Raj's 300 shares (calls-in-arrears) must be excluded from fresh cash receipts.
31 mark for arriving at the correct figure of Rs. 2,45,000 (option C).

Hint

Deduct both the shares already paid in advance and the shares in arrears from the total before multiplying by the call amount to find the fresh cash received.

Quick Oral Answer

Cash is received only from shareholders who neither prepaid the call as calls-in-advance nor defaulted on it as calls-in-arrears — here, that is 49,000 shares out of 50,000, giving Rs. 2,45,000.

Analysis & Explanation

Concept

When a shareholder pays the entire share money in advance (before the call is actually made), it is recorded as Calls-in-Advance; no fresh cash is received from that shareholder when the call is later made and adjusted. A shareholder who fails to pay a call creates Calls-in-Arrears, and no cash is received from them either.

Working

Total shares issued = 50,000; First and Final call = Rs. 10 − Rs. 3 (application) − Rs. 2 (allotment) = Rs. 5 per share
Usha's 700 shares: already paid in full at allotment → $\text{Rs. }5 \times 700 = \text{Rs. }3,500$ was received earlier as Calls-in-Advance; no fresh receipt now
Raj's 300 shares: first and final call not paid → $\text{Rs. }5 \times 300 = \text{Rs. }1,500$ remains as Calls-in-Arrears; not received
Shares from which fresh cash is received now = $50,000 - 700 - 300 = 49,000$
Amount debited to Bank = $49,000 \times \text{Rs. }5$ = Rs. 2,45,000

Why other options are wrong

(A) Rs. 2,50,000 wrongly assumes the call money is received on all 50,000 shares, ignoring both Usha's advance and Raj's arrears.
(B) Rs. 2,48,500 adjusts for only one of the two exceptions instead of both.
(D) Rs. 2,52,000 does not correspond to any correct combination of adjustments.

Common Mistakes

1Forgetting to exclude Usha's shares (calls-in-advance) from the fresh call receipt, since her money was already received earlier.
2Deducting only Raj's arrears and ignoring Usha's advance payment, or vice versa.
3Confusing calls-in-advance with calls-in-arrears and applying the adjustment in the wrong direction.

Interesting Facts

As per Table F of the Companies Act, 2013, a company may pay interest on calls-in-advance at a maximum rate of 12% p.a. if its Articles of Association permit, even though such interest is optional.

Calls-in-arrears typically attract interest at up to 10% p.a. under a company's Articles, giving companies a real financial incentive to enforce prompt payment of share calls.

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Frequently Asked Questions

What happens when a shareholder pays the full share amount before it is called?

The excess amount is treated as Calls-in-Advance, a liability for the company, and is adjusted against the relevant call when it is actually made — no fresh cash is received at that time.

How do calls-in-arrears affect the amount received on a call?

Calls-in-arrears reduce the total cash actually received when a call is made, since the defaulting shareholder's amount remains outstanding until paid or the shares are forfeited.