A Cheque is an instruction in writing made upon a bank to pay a given sum of money to a named person or bearer, at a specific date.
FEATURES OF A CHEQUE
1. The name and the branch of the bank.
2. The date the cheque will be presented for payment.
3. The account number of the drawer.
4. The serial number for reference purposes.
5. The name of the payee who may be the drawer.
6. The signature of the drawer.
7. The amount to be paid to the payee.
8. The amount in words and in figure.
9. The stamp duty.
Functions of A Cheque
• It makes payment convenient
• It can be stopped
• It safe means of remitting money
• It removes risks of carrying physical cash
• Cheque Act as receipt
• It makes business transactions possible within a short time.
Parties To A Cheque
The drawer : This is the owner of the account who writes the cheque to his creator.
The drawee: This is the bank where the cheque will be presented and cashed.
Payee : This is the person who presents the cheque in the bank for payment and whom the cheque is made payable.
TYPES OF CHEQUE
- Bearer Cheque : This is a cheque that is made payable to whoever that present it and that is the meaning of the word ‘bearer’
- Order cheque : This is a cheque made payable to a person named on it or his order.
- Open Cheque : It is a cheque without transverse line drawn across its face
- Crossed Cheque : It is the opposite of an open cheque because, it has two transverse lines drawn across other face in between the two lines, it may or may not be written ‘&co’ or ‘Not Negotiable’
Ways Of Crossing A Cheque
• General Crossing : A cheque is said to be “generally crossed” when two transverse lines are drawn on it face with the the word “&Co” “Not Negotiable” etc
• Special Crossing : A cheque with ‘ special crossing’ has two transverse lines on its face with the name of a particular bank written in between the two lines.
EFFECT OF CROSSING A CHEQUE
1. A crossed cheque must be paid into a bank current account.
2. It cannot be cashed at the counter, unless the drawer writes “please pay cash” in between the two transverse line.
3. It restricts a cheque to a particular bank in a town.
4. It prevents it from being cashed if it stolen.
5. It must last for at least four working days before it matures when it is paid into a current account.
Forms Of Cheque
1. Post-Dated : This is a cheque with future date or dated head of time.
2. Stale : It is the opposite of a post-dated cheque and it has past date or an expired cheque
3. Certified : It is cheque that is drawn or ratifies by bank on behalf of customer.
4. Dishonoured Cheque : This is a cheque a bank refuses to pay cash on presentation.
There are reasons for Dishonoured Cheque;
• Insufficient fund
• The death of the drawer
• irregular signature
• Non-existing
• Bankruptcy
• Frozen account
• A stale cheque
• When there’s alternation
• A post-dated cheque
• When payment is stopped
• If the account is closed
• If there Re difference between the amount written in words and in figures.
Bounced Cheque
It is another name for dishonoured cheque and when it is referred to a cheque, it means a cheque returned by a bank as worthless which is very derogatory. A bounced cheque is also known as a dud cheque.
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