Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting for Shares

Question:

Sometimes shareholders pay a part or the whole of the amount of calls not yet made. The amount so received from shareholders is:

Options:

Credited to Share Allotment Account

Credited to first call Account

Debited to calls in Advance Account

Credited to calls in Advance Account

Correct Answer:

Credited to calls in Advance Account

Explanation:

The correct answer is option (4) : Credited to calls in Advance Account. 

Calls in Advance Account is the appropriate account for recording the amount received from shareholders for calls that haven't been formally made yet. It represents a liability for the company, as the shareholders have essentially paid ahead of the official call. The journal entry for this-
Bank A/c Dr.
   To Calls in advance A/c