Question

Money received in advance from shareholders before it is actually called up by the directors is:

• A. Debited to calls in advance account
• B. Credited to calls in advance account
• C. Debited to share capital account \
• D. Credited to share capital account

Hint:

Calls in advance are recorded as a liability since the company owes the shareholders until the call is made.

Answer 1

The Correct Option is B

Funds received from shareholders prior to a formal call are classified as "Calls in Advance." This pre-received amount is considered a liability as it is not yet due. Consequently, these funds are recorded in the Calls in Advance Account.