Pro-rata Allotment, Calls in Arrears, Calls in advance.pptx

Accountancy

1. Pro-rata Allotment, Calls in Arrears, Calls in Advance - Corporate Accounting - Pulkit Choudhary

2. Pro-rata Allotment In the case of over-subscription, it is not possible for the company to allot  shares  to every applicant in the number that he desires.  The company needs to allot the shares in a proper manner. The company has the following three alternatives : Accept some applications in full and reject the others totally. Make Pro-Rata Allotment. Adopt a combination of the above two . Usually, the company does not consider the multiple applications from the same person. Also, generally a company takes the third course of action. The problem of accounting of  over-subscription  is usually resolved at the time of allotment of shares. Pro-rata allotment refers to the allotment of shares in  proportion  of the shares applied for. When a company makes pro-rata allotment, it adjusts the excess money received at the time of application firstly, towards the allotment and then towards calls.

3. Calls in Arrears Proportion of called-up capital not paid by the shareholders. Two alternative method Without opening call-in-arrear account. Accounting Treatment: Amount of call-in-arrear will be shown as a deduction from total amount due. By opening call-in-arrear account. Accounting Treatment: W e  transfer the unpaid amount to Calls-In-Arrears Account.

4. Question Ram and company was floated with an authorised capital consisting of 10,000 shares of 10 each. The amount is payable as 4 on application, 3 on allotment, 2 on first call and 1 on final call. All shares were offered to the public for subscription. Applications were received for all the shares and all were accepted. All money was duly received except a holder of 200 shares who failed to pay calls.

5. Journal Entries

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7. Calls in advance The company treats calls-in-advance as a  debt  of until it makes the calls. The amount already paid is adjusted. Calls-in-advance may also arise when the number of  shares  allotted to a person is much smaller than the number applied by him for and the terms of issue allow the company to retain the amount received in excess of application and allotment money . The company can retain only such amount as is required to make the allotted shares fully paid. After transferring the amount to the relevant call accounts, the company closes the calls-in-advance account. It shows this amount under a separate heading, namely ‘calls-in-advance’ on the  liabilities  side.

8. Question Ram and company was floated with an authorised capital consisting of 10,000 shares of ₹10 each. The amount is payable as ₹4 on application, ₹3 on allotment, 2 on first call and 1 on final call. All shares were offered to the public for subscription. Applications were received for all the shares and all were accepted. One shareholder to whom 200 shares were allotted paid all the money at the time of allotment.

9. Journal entries

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11. . Thank You