Question

Give any two differences between Calls in Arrears & Calls in Advance.

Hint:

Calls in arrears represent unpaid amounts, while calls in advance represent overpaid amounts before the call is due.

Answer 1

Step 1: Understanding Calls in Arrears and Calls in Advance.
- Calls in Arrears refer to the amount of money that shareholders have not paid on shares after being called for payment. If a shareholder fails to pay the required amount by the due date, the amount is termed as calls in arrears.
- Calls in Advance refers to the amount paid by shareholders in advance, before the official call for payment. It is an amount paid by shareholders in anticipation of a future call on shares. Step 2: Two Key Differences:
1. Timing of Payment: Calls in arrears are the unpaid amounts for the shares after the call is made, whereas calls in advance are amounts paid before the call is made.
2. Treatment in Books: Calls in arrears are shown as a liability in the company’s balance sheet, while calls in advance are recorded as a liability but under the shareholder's account. Step 3: Conclusion.
The main difference lies in when the payment is made and how they are treated in the books of the company.