A company can accept calls in advance, if authorised by:

Articles of Association

The correct answer is option 3- Articles of Association.

A company can accept calls in advance if authorized by its Articles of Association. The Articles of Association outline the rules and regulations governing the internal management and operations of the company. If the Articles of Association grant the company the authority to accept calls in advance, then they can do so.

Sometimes shareholders pay a part or the whole of the amount of the calls not yet made. The amount so received from the shareholders is known as “Calls in Advance”. The amount received in advance is a liability of the company and should be credited to ‘Call in Advance Account.” The amount received will be adjusted towards the payment of calls as and when they becomes due.

The balance in ‘Calls in Advance’ account is shown as a separate item under the title Equity and Liabilities in the company’s balance sheet under the head ‘current liabilities’, as sub-head ‘others current liabilities’. It is not added to the amount of paid-up capital. As ‘Calls in Advance’ is a liability of the company, it is under obligation, if provided by the Articles, to pay interest on such amount from the date of its receipt up to the date when appropriate call is due for payment. A stipulation is generally made in the Articles regarding the rate at which interest is payable. However, if Articles are silent on this account, Table F is applicable which provides for interest on calls in advance at a rate not exceeding 12% per annum.