Arrears
Encyclopedia
Arrears is a legal term for the part of a debt
that is overdue after missing one or more required payments. The amount of the arrears is the amount accrued from the date on which the first missed payment was due. The term is usually used in relation with periodically recurring payments such as rent
, bills
, royalties
(or other contract
ual payments), and child support
.
Payment in arrears is a term describing payments made after a service has been provided. In this case use of the word "arrears" does not imply any breach.
For instance, rent is usually paid in advance, but mortgages in arrears (the interest for the period is due at the end of the period). Employees' salaries are usually paid in arrears.
In other contexts, payment at the end of a period is referred to by the singular arrear, to distinguish from past due payments. For example, a housing tenant who is obliged to pay rent at the end of each month, is said to pay rent in arrear, while a tenant who has not paid rental due for 90 days is said to be three months in arrears. Precise usage may differ slightly (e.g. "in arrear" or "in arrears" for the same situation) in different English-speaking countries.
This is the "past due" sense.
(an annuity is a series of equal amounts occurring at equal time intervals, such as £1,000 per month for 20 years). If the recurring amount comes at the end of each period, the annuity is described as an annuity in arrears or as an ordinary annuity. A loan repayment schedule is usually an annuity in arrears. For example, you borrow £10,000 on September 30 and your first monthly payment will be due on October 31, the second payment will be due on November 30, and so on.
This is the "end of period" sense.
that sets and pays interest in arrears. In a normal swap, the interest rate is set in advance, and paid in arrears. In a LIBOR-in-arrears swap, the interest rate is determined at the time of payment, which is in arrears; the amount to be paid is not known in advance.
Debt
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...
that is overdue after missing one or more required payments. The amount of the arrears is the amount accrued from the date on which the first missed payment was due. The term is usually used in relation with periodically recurring payments such as rent
Renting
Renting is an agreement where a payment is made for the temporary use of a good, service or property owned by another. A gross lease is when the tenant pays a flat rental amount and the landlord pays for all property charges regularly incurred by the ownership from landowners...
, bills
Bill (payment)
A bill or invoice is a document requesting payment for an order previously supplied. Presentation of a bill is common practice on the part of credit card companies, utilities, and other service providers...
, royalties
Royalties
Royalties are usage-based payments made by one party to another for the right to ongoing use of an asset, sometimes an intellectual property...
(or other contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
ual payments), and child support
Child support
In family law and public policy, child support is an ongoing, periodic payment made by a parent for the financial benefit of a child following the end of a marriage or other relationship...
.
Payment in arrears is a term describing payments made after a service has been provided. In this case use of the word "arrears" does not imply any breach.
Definition
The term in arrears is also used in many contexts to refer to payments made at the end of a period, as distinct from in advance, which are payments made at the start of a period.For instance, rent is usually paid in advance, but mortgages in arrears (the interest for the period is due at the end of the period). Employees' salaries are usually paid in arrears.
In other contexts, payment at the end of a period is referred to by the singular arrear, to distinguish from past due payments. For example, a housing tenant who is obliged to pay rent at the end of each month, is said to pay rent in arrear, while a tenant who has not paid rental due for 90 days is said to be three months in arrears. Precise usage may differ slightly (e.g. "in arrear" or "in arrears" for the same situation) in different English-speaking countries.
Calls in arrears in balance sheet
When any shareholder does not pay its call money to company on its due date. At that time, company will deduct that calls in arrears from total called up capital for showing net paid up capital in balance sheet:).Dividends
In accounting, arrears is used in at least three destinations. One use involves the past, omitted dividends on cumulative preferred stock. If a corporation fails to declare the preferred dividend, those dividends are said to be in arrears. The dividends in arrears must be disclosed in the notes (footnotes) to the financial statements. (Cumulative preferred stock requires that any past, omitted dividends must be paid to the preferred stockholders before the common stockholders will be paid any dividend.)This is the "past due" sense.
Annuities
Another use of the word arrears occurs with annuitiesAnnuity (finance theory)
The term annuity is used in finance theory to refer to any terminating stream of fixed payments over a specified period of time. This usage is most commonly seen in discussions of finance, usually in connection with the valuation of the stream of payments, taking into account time value of money...
(an annuity is a series of equal amounts occurring at equal time intervals, such as £1,000 per month for 20 years). If the recurring amount comes at the end of each period, the annuity is described as an annuity in arrears or as an ordinary annuity. A loan repayment schedule is usually an annuity in arrears. For example, you borrow £10,000 on September 30 and your first monthly payment will be due on October 31, the second payment will be due on November 30, and so on.
This is the "end of period" sense.
Finance
A LIBOR-in-arrears swap is an interest rate swapInterest rate swap
An interest rate swap is a popular and highly liquid financial derivative instrument in which two parties agree to exchange interest rate cash flows, based on a specified notional amount from a fixed rate to a floating rate or from one floating rate to another...
that sets and pays interest in arrears. In a normal swap, the interest rate is set in advance, and paid in arrears. In a LIBOR-in-arrears swap, the interest rate is determined at the time of payment, which is in arrears; the amount to be paid is not known in advance.