Calls in advance are treated in the balance sheet as_______
Question 1 Report
Calls in advance are treated in the balance sheet as_______
Answer Details
Calls in advance are treated in the balance sheet as a current liability.
Calls in advance refer to the money paid by shareholders in advance for shares that they have subscribed for, but not yet fully paid for. The company is therefore indebted to the shareholders for this amount until the shares are fully paid for.
In the balance sheet, current liabilities are short-term debts or obligations that are due within a year, and calls in advance typically fall under this category. This is because the shareholders have the right to demand a refund of the money they paid in advance if the shares are not allotted to them or if they choose not to take up the shares.
Therefore, calls in advance will be listed as a liability in the balance sheet, typically under the "current liabilities" section, until the shares are fully paid for and the liability is discharged.
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