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Interest on calls in advance ?

Himesh Katuria (Student) (258 Points)

21 February 2013

Respected Elite members of CCI,

I have a little query regarding journal entry.

Can you pls explain me in detail that how to understand this journal entry,Which Golden Rule I have to apply here,

(1) When Interest amount is due

Interest on Calls in Advance A/c-----Dr.

To Sundry Share holders A/c

Thankyou

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3 Replies

Devendra (Chartered Accountant) (4775 Points)
Replied 21 February 2013

Dear Marilyn,

1) Interest is given to the Shareholders. So the Interest given to the shareholders will be treated as expense by the Company. Therefore, the Interest on Calls in Advance will be debited.

2) The Shareholders account will be credited because the Interest is still payable to them.

3) The Accounting Rule will be interpreted as follows:-

i) Debit all expense so the Interest on Calls in Advance will be debited.

ii) Credit the giver so the Shareholders account will be credited.

Accounting Golden Rules :-

Nominal Account - Debit All Expenses and Lossess, Credit All Incomes and Gains.

Personal Account - Debit the Receiver, Credit the Giver.

Regards,
Devendra Kulkarni

1 Like

Adit babel (Article) (31 Points)
Replied 22 August 2014

Can You please tell me from when Interest on call in advance becomes Due?

For example If, a shareholder pays the full money with the application. So we pay that member interest from application date or Allotment date?

Ashish Tewani (CA Final Article at V.P. Mehta & Co.) (83 Points)
Replied 22 August 2014

An applicant for shares becomes a Shareholder only on allotment of shares to him/her, hence he will be entitled to claim interest on full amount paid by him only from allotment date and not from application date.