Cheques Flashcards
What is a Cheque?
A written instruction to the bank (Drawee) to make a payment of a specific sum of money on a client’s behalf (Drawer), from his bank account
The client may be an individual or company.
How long are cheques valid?
Six months
Who is the Payee in a cheque transaction?
Recipient of the cheque
Who is the Drawer in a cheque transaction?
Person issuing the cheque
Who is the Drawee in a cheque transaction?
The BANK from which the money is being drawn
What is an Endorser in the context of a cheque?
The signature of the Payee at the back of the Cheque, indicating that he/she is the intended recipient of the funds
What is the purpose of a cheque number?
Helps with record keeping and guards against fraud or theft
What details are included on a cheque?
- The date written
- Name of the Payee
- Amount in words and figures
- Signature of the Drawer
- Account number of the Drawer
- Cheque stub
- Endorsement Line
What is a cheque stub?
Kept by the Drawer after the cheque is torn off, serving as proof of transaction
What are the types of cheques?
- Open Cheques
- Crossed Cheques
- Post-dated Cheques
- Dishonoured Cheques
What is an Open Cheque?
One which is easily payable, in cash or paid into a bank account at the counter of a bank
Why are Open Cheques considered not very safe?
If lost or stolen, someone else besides the Payee may be able to cash them
What is a Crossed Cheque?
A cheque with two parallel lines on its face that cannot be cashed at a bank
What is the main advantage of a Crossed Cheque?
It can only be paid into the payee’s account, making it safer than an Open Cheque
What is a Post-dated Cheque?
A cheque that is dated sometime in the future and will not be processed before that date
What happens if a Post-dated Cheque is presented before its date?
It will not be processed by the bank
What is a Dishonoured Cheque?
A cheque that has not been paid by the drawer’s bank
What are some reasons for a Dishonoured or Bounced Cheque?
- Amount on cheque exceeds balance
- Drawer cancelled payment
- Bank account closed
- Signature mismatch
- Value not written in both words and numbers
- Cheque is stale
- Post-dated cheque presented early
- Altered cheque not verified
- Court order to cease payment
- Unclear payee name or account number
