Cheque

Introduction

Q1) What is cheque?

Ans: A cheque is a written instruction or an order given by the account holder to the bank to pay a certain sum of money to a person or an institution named therein or to the bearer of the cheque. Cheque is the printed form supplied to the depositors by the bank for withdrawing cash.

Q2) What are the different parties involved in cheque?

The different parties involved in cheque are;

a) Drawer (the account holder who writes the cheque)

A firm or an organization or a person having deposits in bank and who issues a cheque, is a drawer. Actually, the drawer is the depositor, who orders the bank to pay specified sum of money to the person or organization specified in the cheque.

b) Drawee (the bank on which the cheque is drawn)

Bank is a drawee because it receives the order from the customers/depositors fro making the payment of a sum of money on demand. So, the bank on which the cheque is drawn is known as drawee.

c) Payee (the party who gets the amount)

The payee is the party to whom cheque amount is paid by the bank. Generally, the name of the payee is written on the cheque and he can draw specified amount from the bank. If the name of the drawer or word "self" is written on the cheque, in such case the drawer himself becomes the payee.

Q3) Some rules of the cheque are as follows;

a) The date written on the cheque must be correct and clear. It must not exceed the expiration time specified by the bank or be post dated.

b) The name, surname and address of the payee must be written clearly.

c) The amount in words  and figures must be same.

d) The account number must be correctly and clearly written on the cheque.

e) The signature of the account holder on the cheque  must match up with the specimen signature.

f) The amount holder must have sufficient balance in the account.

g) Any changes made while writing the cheque must be signed by the account holder.

h) Cheque must be written in the language/s used in the bank.

Note: If the above mentioned rules or conditions are not met the bank will refuse to make payment. This is called dishonor of cheque.

Q4) What are the different types of cheque?

The following are the different types of cheque;

a) Bearer cheque:  A bearer cheque is that cheque the payment of which can be made to anybody presenting it to the bank for payment. The bank cannot be responsible if it makes payment to a wrong person. Any person finding the bearer cheque can withdraw the amount from the bank. Therefore, it is not safe type of cheque. It does not require endorsement.

b) Order cheque: A cheque the payment of which is made only to the specified person in the cheque. The signature of person or party whose name is written in the cheque is essential for enchashment of this type cheque. He/she must put his/her signature on the back of the cheuqe. Having the signature of the person or party whose name is written in the cheque is called endorsement. 

c) Cross cheque: A cross cheque is a cheque which is prepared by following certain criteria of crossing. Simply, A cheque in which two parallel lines are drawn across it faces is called crossed cheque. Crossing on cheque is made to top left corner with or without the words like & co, Not Negotiable etc. The payment of such cheque is not made directly to the payee. It will deposited into the account of payee and payee, in turn, issues his own cheque to draw money from the bank. In fact, cross cheque is very safe and useful means of paying as well as remitting large sums from one place to another place.

Cross cheque can be classified into two types. They are discussed as follows:
i) General Crossing: If the cross cheque does not specify the name of bank to which amount is deposited, it is called general crossed cheque. The amoun tof this type of cheque can be collected by any bank where there is the account of payee. The drawee bank simply makes payment on this cheque on behalf of payee to the bank of payee.

ii) Special crossing: If a cross cheque specifies the name of payee's bank where amount can be collected, it is called special cross cheque. In this type of cheque, the name and address of payee's bank is written within the crossing line and the drawee bank only makes payment in the payee's account of specified bank mentioned in the crossing.