Cheque
A Bill of Exchange drawn on a specified banker and not expressed to be payable otherwise that on demand
3 paties related to cheque
1. Drawer
The maker or writer of a cheque who directs the drawee to pay the stated amount to a third part
2. Drawee
The entity that is expected and pay cheque on presentation or on a ceertain date
3. Payee / Beneficiary
The person in the instrument, to whom or to whose order the money is, by the instrument directed, to be paid
Types of Cheque
1. Open Cheque
To get cash over the counter at the bank
- Receive its payment over the counter at the bank
- Deposit the cheque in his account
- Pass it to someone else by signing on the back of cheque
2. Crossed Cheque
The payment such as cheque not made over the counter at the bank
A cheque can be crossed by drawing two transverse parallel line across the cheque, with or without the writing 'account payee' or 'not negotiable'
The lines usually drawn on the left-hand top corner of the cheque
If the collecting banker allows the proceeds of the cheque so crossed to be credited to any other account, he may be help guilty of negligence in the event of an action for wrongful conversion of funds being brought against him
3. Bearer Cheque
A cheque which s payable to any person who present it for payment at the bank counter
4. Open Cheque
An order cheque is one which is payable to a particular person
can be transferred by mere delivery and requires no endorsement
The payee can transfer an order cheque to someone else by signing his or her name behind the cheque
The word "bearer" may be cut out or cancelled and the word "order" may be written
Parts of Cheque
place of issue
cheque number
account number MICR (Magnetic Ink Character Recognition)
date of issue
payee
amount of currency
signature of drawer
Elements of Cheque
No. 1 - Name of banking institution (drawee bank)
No. 2 - "Account Payee Only"
No.3 - Payee
No. 4 - Date of the cheque
No.5 - The person who holds and presents the cheque at the banking institution
No.6 - The payment amount written in the words
No. 7 - Name of the account holder (drawer name)
No.8 - Your signature as the drawer of the cheque
No.9 - Cheque ID
No. 10 - Serial number of the cheque
No. 11 - Bank code
No. 12 - Branch code
No. 13 - Your current acount
No. 14 - Transaction code
No.15 - amount field