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

When shareholders pay money before the directors officially call for it, this is treated as Calls in Advance.

From the company's perspective, this advance payment creates a liability because:

• The company has received the money (asset increased)
• But hasn't yet made the official call for this amount
• The company is obligated to adjust this amount against future calls

The journal entry for receiving advance payment would be:

$$\text{Bank/Cash A/c} \quad \text{Dr.}$$Bank/Cash A/cDr.
$$\quad \text{To Calls in Advance A/c}$$To Calls in Advance A/c

Since Calls in Advance is a liability account (appears under Current Liabilities in the Balance Sheet), any receipt of advance payment must be credited to this account.

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Think of it this way: When someone pays you in advance, you owe them the service/product later. Similarly, the company owes the adjustment of this amount against future calls → it's a liability → credit balance.

Correct Answer: Option 2 - Credited to calls in advance account