SS2 Second Term Financial Accounting Lesson Note – Issue of shares: Share Discount Account

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WEEK 10      

TOPIC:  Issue of shares (f) Share discount account, calls in arrears, calls in advance, forfeiture and re-issue of shares

CONTENT:  1. Preparation of issue of shares with, calls in arrears, calls in advance, forfeiture and re-issue of shares.

CALLS IN ARREARS

This is a situation when the amount actually received on a call is less than what is expected. This is likely to happen when a shareholder fails to pay the amount due on call. The amount shall be deducted from the share capital in the balance sheet to reveal the actual received.

Accounting Entries

Dr:      Calls in arrears account

Cr:      Calls account

With the amount not yet received on the calls.

CALLS IN ADVANCE

It is possible that a shareholder pays in a call that is not yet due for payment together with a due call, when this happens, the amount paid is in excess of the current calls made, such calls are calls in advance.

Such amounts are transferred to Calls in advance account.

Accounting entries

1. When call is received

Dr.      –           Bank account

Cr.      –           Call in advance account

1.    When the call actually become        due

                                    Dr.      –           Call in advance

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