The correct answer is: D. Credited to calls in advance account
Money received in advance from shareholders before it is called-up by the directors is credited to calls in advance account. This is because the money is not yet due, and the shareholders have not yet been called upon to pay it. The money is therefore treated as a liability of the company, and is recorded in the calls in advance account.
The calls in advance account is a liability account that is used to track the amount of money that has been received from shareholders in advance of calls. The account is typically credited when money is received from shareholders, and debited when the money is called up.
The calls in advance account is a useful tool for tracking the amount of money that is owed to shareholders. It can also be used to determine the amount of money that is available to the company for other purposes.
Here is a brief explanation of each option:
- A. Debited to calls in arrears account
This option is incorrect because the money has not yet been called up. The calls in arrears account is used to track the amount of money that is owed by shareholders who have not yet paid their calls.
- B. Debited to calls in advance account
This option is incorrect because the money has already been received from shareholders. The calls in advance account is used to track the amount of money that has been received from shareholders in advance of calls.
- C. Credited to calls in arrears account
This option is incorrect because the money has not yet been called up. The calls in arrears account is used to track the amount of money that is owed by shareholders who have not yet paid their calls.
- D. Credited to calls in advance account
This option is correct because the money has already been received from shareholders. The calls in advance account is used to track the amount of money that has been received from shareholders in advance of calls.