What are Calls in Arrears & Advance | Meaning | Auditors Duty

What are Calls in Arrears?

When one or more shareholders fail to pay the amount due from them towards allotment and/or calls, such dues are called calls-in-arrears. If call amount is due from any of the directors, secretaries and treasurers, it should be shown separately in the Balance Sheet. Articles of Association of a company may provide for the charging of interest on calls in arrears.

Auditor’s Duty as to Calls in Arrears

The auditor should perform the following duties regarding the calls-in-arrears:

1. The auditor should verify the amount of calls due with the Share Register.

2. He should also obtain a list of all calls-in-arrears.

3. He should see that calls-in-arrears are shown in the Balance Sheet properly.

What are Calls in Advance?

A shareholder can pay the whole or part of the amount remaining unpaid on his shares even before the call is made. This is only a voluntary payment and is known as calls in advance. Sec. 92 of the Act states that a company can accept such advance amounts only when it is authorized by the Articles.

The amount paid in advance can be adjusted when the calls are actually made. An interest can also be paid if the Articles so authorize. Where it is agreed that the interest be paid, it may be paid out of capital, if profits are not available. However, the shareholder cannot claim repayment of the amount except in the event of winding up. Such shareholders rank after creditors in respect of advance, but in priority to the other shareholders.

The effect of the payment in advance of calls is that the shareholders’ liability in respect of the calls or call is extinguished. But they are not be entitled for voting right for the money paid in advance of the calls. When, however, the call is made and these money become payable, they will be entitled for voting.

Auditor’s Duty as to Calls in Advance

The auditor’s duty as to calls in advance is as below:

1. The auditor should see whether the Articles authorize the payment of calls in advance.

2. He should vouch the calls received in advance with counterfoils of the Receipt Book and entries in the Cash Book.

3. He should see that they have not been treated as part of capital and are shown separately in the Balance Sheet.

4. He should see that the Articles authorize the company to give interest on calls in advance.

Leave a Reply

Recent Posts

Related pages

formula for labour turnovernominal wage definitionthe main features of a capitalistic economic system areequity gearing formulasteps of activity based costingsecuritize definitionwhat is the profitability indexarrear definitionfrederick taylor scientific management definitionprivity of contract definitiondumping definition economicsfinance lease operating leaseprivity of contract assignmentmethods of forecasting exchange ratesnegatives of monopoliesreceivables to sales ratiodisadvantages to corporationsdefine inventory turnover ratiodefine overhead rateadvantages and disadvantages of environmental auditjoint hindu family businessdecentralized organizational structuresmarketing skimming strategymarine cifunderwrite defdisadvantages of sole traderpromissory note payable to bearerleverage ratios analysisfranchisor and franchisee advantages and disadvantageswagering agreement definitiondefine casteismcircular cash flowrights and duties of bailordirectdistributiondistinguish between void and illegal contractstypes of negotiable instrumentmail sidbi indisadvantages of traditional commercesole trading companymeaning of verification in auditingdebentures and typessecured debenturesadvantage of sole traderquick ratio definitionmercantile actsselling process stagesreasons for demotiondisadvantages of sole tradersdecentralization and delegation of authoritymeaning of liquidity ratioadvantages and disadvantages of underwritingfinal dividend and interim dividendimportance of capital structure in financial managementsampling techniques in biostatisticsdefinition of specialty goodsmeaning of forfeitingadvantages of e commerce wikipediawho is a autocratic leaderdoctrine ultra vires company lawtick marks in auditingdefine irdaservices rendered by commercial banksexplain the concept of consumer sovereigntytqm implementation processasset utilization ratiosample precis writing examplespreci writing examplesmeaning and definition of capital budgetingwhat is marginal costing in cost accountingreceivables turnover formulaadvantage of socialism