Calls-in-Arrears: It often happens that some shareholders fail to pay the amount on allotment and or calls due on the shares held by them. The total of the unpaid amounts on account of one or more installments is known as ‘Calls-in-Arrears’.
It is not mandatory to maintain a separate account for calls in arrears. The debit balance on the Allotment or Calls Account will be presented in the balance sheet not as an asset but by way of deduction from the called up capital.
The Articles of Association of a company usually empower the directors to charge interest at a stipulated rate on calls in arrears. In case the Articles are silent in this regard, the rule contained in Table A shall be applicable. Table A represents the model Articles of Association framed under Companies Act 1956. It provides the rate of interest must not exceed 5 per cent.
Calls-in-Advance: Sometimes, it so happens that a shareholder may pay the entire amount on his shares even though the whole amount has not been called up. The amount received in advance of calls from such a shareholder should be credited to "calls in advance" account and should be shown separately from the called up capital in the Balance Sheet. The company can receive calls in advance if the article permits. Interest is usually paid on calls in advance and the article specifies the rate of interest. The maximum rate of interest allowed on calls in advance is 6% per annum. It should be noted that calls in advance are not entitled to any dividend.