Question

The following journal entry is recorded for the amount of calls received in advance ______________________.

• A. Bank A/c Dr. To Calls-in-Advance A/c
• B. Calls-in-Advance Dr. To Bank A/c
• C. Interest on Calls-in-Advance A/c Dr. To Calls-in-Advance A/c
• D. Bank A/c Dr. To Interest on Calls-in-Advance A/c

Answer 1

The correct option is A Bank A/c Dr.

To Calls-in-Advance A/c

Sometimes some shareholders pay a part or whole of the amount of the calls not yet made. The amount so received from the shareholders is known as "Calls in Advance". The amount received in advance is a liability of the company and should be credited to 'Call-in Advance Account'. The amount received will be adjusted towards the payment of calls as and when they become due. Table A of the companies act provides for the payment of interest on calls in advance at a rate not exceeding 6% per annum.

The following journal entry is recorded for the amount of calls received in advance:

Bank A/c Dr.

To Calls-in-Advance A/c