Cheques: Detailed Description PDF

CHEQUE Detailed description of cheques INTRODUCTION:- Cheques are a type of payment instrument that allows individuals or businesses to transfer funds from their bank account to another party's bank account.  WHAT IS A CHEQUE? A cheque is a written order that instructs a bank to pay a specific...

CHEQUE Detailed description of cheques INTRODUCTION:- Cheques are a type of payment instrument that allows individuals or businesses to transfer funds from their bank account to another party's bank account.  WHAT IS A CHEQUE? A cheque is a written order that instructs a bank to pay a specific amount of money from the drawer's (issuer's) account to the payee's (recipient's) account. structure of a cheque Key Components of a Cheque: Date Payee’s name Amount(numeric and written) Drawer’s signature Drawer’s account number Bank name and branch  Types of Cheques: 1.⁠⁠Personal Cheque: Issued by an individual from their personal account. 2.⁠⁠Business Cheque: Issued by a company from their business account. 3.⁠⁠Crossed Cheque: A cheque with two parallel lines across the face, indicating it can only be deposited into the payee's account. 4.⁠⁠Open Cheque: A cheque without any restrictions, allowing the payee to cash or deposit it. 5.⁠⁠Bearer Cheque: A cheque payable to anyone presenting it.  How Cheques Works? 1.⁠⁠Issuer writes and signs the cheque. 2.⁠⁠Payee receives and deposits the cheque into their bank account. 3.⁠⁠Bank verifies the cheque and transfers funds from issuer's account to payee's account.  Advantages of Cheques: 1.⁠S ⁠ ecurity: Cheques provide a paper trail and can be stopped if lost or stolen. 2.⁠⁠Control: Issuer can cancel or stop payment. 3.⁠⁠Record-keeping: Cheques provide a physical record of transactions.  Disadvantages of Cheques: 1.⁠⁠Time-consuming: Clearance process can take several days. 2.⁠⁠Risk of loss or theft 3.⁠⁠Limited acceptance (some merchants may not accept cheques) FEATURES: cheque can be issued by individuals who hold a savings account or a current a/c. cheque is always drawn on a specified banker. it is an instrument that is payable on demand. signed by maker. cheque should contain the date. an oral order to pay the money is not recognised as a cheque. it is an unconditional order. the payee of the cheque is fixed and cannot be changed.  Cheque Crossing:- Crossing a cheque is a way to direct a cheque to be deposited into a bank account instead of being cashed immediately. This ensures that only the payee named on the cheque can access the funds.  To cross a cheque, two parallel lines are drawn across the cheque, either across the entire cheque or in the top left-hand corner. The lines should not be straight lines, but rather arranged in a crosswise direction. The words "not negotiable" may also be added to the crossing. Types of cheque crossing:- General cheque crossing Special cheque crossing Restrictive cheque crossing 1)General Cheque Crossing:- A general cheque crossing is a way to cross a cheque that involves drawing parallel lines across the cheque. It instructs the bank to transfer the amount to the payee’s account instead of cashing it over the counter.The payee can collect the payment through their bank account.  Benefits:- To ensure that the funds can only be deposited into a bank account and cannot be immediately cashed over the counter. Special Cheque Crossing:- A special crossing on a cheque refers to a type of crossing that includes the name of a specific bank between the two parallel lines on the cheque. Benefits:- A special crossing cheques makes it harder for the funds to be stolen or misused.The cheque can onlybe deposited into a bank account,and the funds can’t be cashed directly. Restrictive cheque crossing:- It is a method of securing a cheque by limiting how it can be processed when a cheque is crossed restrictively,two parallel lines are drawn across the cheque face,usually with the word ‘account payee only’ written between them.This provides even more security than a general or special crossing.  Benefits:- Increased security:-Since the cheque can only be deposited into the payee’s account, it reduces the risk of fraud. No endorsement allowed:-The payee cannot endorse or transfer the cheque to another person or company. Avoid misuse:-Even if the cheque falls into the wrong hands, it cannot be deposited into any other account except that of the payee.  Conclusion:- Cheques remain a widely accepted payment method, especially for business transactions or large purchases. Using crossing a cheque, the issuer of the cheque is protected and safeguarded by the crossing of the cheque. Thank you