(2) Where a shareholder is not able or willing to pay the unpaid call on his shares, he may surrender the shares to the company as a short cut to the long procedure of forfeiture of shares.
Called up share capital not paid. This is the amount that has been called for when shares have been allotted but that amount has not been received as at the date of the balance sheet.
When any shareholder fails to pay the amount due on allotment or on any of the calls, such amount is known as ‘Calls-in- Arrears’/’Unpaid Calls‘. Calls-in-Arrears represent the debit balance of all the calls account and are shown as a deduction from the paid-up capital on liabilities side of the balance sheet.
When shares are forfeited, share capital account is debited. Explanation: Share Capital Account represents the liability of the company as it is the amount that is borrowed from the public. Therefore, at the time of forfeiture of shares, it is debited with a called-up amount.
By opening Calls-in-Arrears Account
Under this method, we transfer the unpaid amount to Calls-In-Arrears Account. As a result, Shares Allotment Accounts and Shares Calls Accounts will not show any balance. The Calls-in-Arrears Accounts will show a debit balance equal to the total unpaid amount on allotment and calls.
Unpaid share capital is where none of the monies due for an allotment of shares which have been issued has been paid. … Although the shareholders might enjoy limited liability protection, their obligation to pay for the shares which have been issued to them is not diminished.
What is called paid-up capital?
Paid-up capital is the amount of money a company has received from shareholders in exchange for shares of stock. Paid-up capital is created when a company sells its shares on the primary market directly to investors, usually through an initial public offering (IPO).
What does being called up mean?
/kɔːl/ us. to be ordered to join a military organization or to be asked to join an official team: He was called up soon after the war started.
How is the calls in arrear treated?
At that time of call, sometimes the shareholders may not pay the amount called before the fixed date. That amount is taken as ‘call-in-arrears’. Thus, the Share Allotment Account gets closed. The total amount of calls in arrears is deducted from called up capital in the balance sheet to arrive at the paid-up capital.
What is the treatment of calls in advance and calls in arrear?
Calls in arrears are the amount that defaulter shareholders called up by the company, whereas calls in advance are the amount that is received in advance from shareholders. Calls in arrears can be recovered in the future whereas calls in advance can be adjusted in the future.
Which is deducted from called up capital to get paid-up capital?
Therefore, paid-up capital is equal to the called-up capital minus call in arrears.