A company maintains 'Calls in Arrears' Account. What entry will it be passed on receiving first call money provided whole amount due in it is not received?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) →
Bank A/c Dr.
Calls in Arrears A/c Dr.
To Share First Call A/c.
The correct journal entry on receiving part of the first call money (i.e., when the full amount is not received) and the company maintains a 'Calls in Arrears' account, is-
Bank A/c Dr.
Calls in Arrears A/c Dr.
To Share First Call A/c
- Share First Call A/c is credited with the total amount due.
- Bank A/c is debited with the amount actually received.
- The balance (unpaid amount) is debited to Calls in Arrears A/c, representing the arrears.
For example- First Call = ₹5 per share on 1,000 shares → ₹5,000 due and If ₹4,000 is received, the journal entry will be-
Bank A/c Dr. ₹4,000
Calls in Arrears A/c Dr. ₹1,000
To Share First Call A/c ₹5,000