Part 1- What's a chq

8/9/2019 Part 1- What's a chq

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What is a Cheque?

Technical

Aspect Of A

Cheque


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What is a Cheque?

A cheque is a customers written instruction to his

banker to pay a specified sum of money from hisaccount to the person he names on theinstruction. Whats it used for?

Cheques are used to settle many important

transactions everyday. So what do you term acheque?

Cheques are, therefore, a form of money.Legally, a cheque is a bill of exchange


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What is a Cheque?

What is a bill of exchange ?

Definition


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What is a Cheque?

BILL OF EXCHANGE

The Act defines a bill as an unconditional order inwriting, addressed by one person to another, signed by

the person giving it, requiring the person to whom it isaddressed to pay on demand or at a fixed or determinable future time a sum certain in money to or

to the order ofa specified person, or to bearer. An instrument which does not comply with theseconditions, or which orders any act to be done in additionto the payment of money, is not a bill of exchange.


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What is a Cheque?

BILL OF EXCHANGE what can you make out of the termsbelow?

unconditional order-

in writing -

signed -

person giving it -

person to whom it is addressed -

on demand -

fixed or determinable future time -

Sum certain in money -

a specified person or bearer -

Answer


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What is a Cheque?

BILL OF EXCHANGE unconditional order should not have any conditions attached

in writing handwritten, typewritten, printed, embossed(impressed)

signed signature, initial, rubber stamp, seal

person giving it drawer, account holder

person to whom it is addressed drawee, drawee bank

on demand up presentation (encashment or through clearing)

fixed or determinable future time dated

Sum certain in money given value of the bill

a specified person or bearer - payee


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WHO ARE PARTIES TO A CHEQUE

There are normally three parties involved in a

cheque transaction: the drawer, the drawee andthe payee.

The relationship between the three parties canbe explained.

The drawer is the person who signs (issues) thecheque. The drawee is the bank which isauthorised by the drawer to pay the money. Thepayee is the person to whom the money is paid.


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WHO ARE PARTIES TO A CHEQUE

The drawer should have a current account with

the drawee bank. When the drawer issues thecheque, he is authorising the drawee bank to pay

money from the account to the payee of the

cheque.

The payee need not be a third party: he could bethe drawer himself or even the drawee bank.


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TECHNICAL ASPECT OF A CHEQUE

Can you list some technicalities of a

cheque and related considerations?


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Drawee Bank

Code Number Account Number

Date

Amount

Cheque Number Drawers Signature

Payee

Alterations

Mutilations Crossing

OK


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Drawee Bank

The banker with whom the customer maintains hisaccount.

Ensure that the cheque received is correctly drawn

on and addressed to a named branch of a drawee

bank as printed on the prescribed cheque. Why?

Back


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Code Number

Each branch of a drawee bank has a different codenumber for easy identification

Back


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Account Number

Ensure that the account number is clearly andcorrectly encoded/printed on the face of the cheque.

Back


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Date

For cheques received for payment by encashmentor through local clearing/agent, ensure that it is

correctly dated. However, when a cheque is not

dated, the payee or the fellow or the bank officer

may enter the date whichever he thinks fit.

If the cheque is post-dated or out of date, it should

be returned to the payee or the collecting bank

reason being eitherpost-dated or out of date.

Back


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Amount

Ensure that the amount payable stated on thecheque is expressed in words and figures.

Where the amount in words and figures differ or the

figures in amount is not made out, the cheque

should be returned to the payee or the collectingbank reason being amount in words and figures

differ or ambiguous.

Back


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Bank Code And Cheque Number

Ensure that the cheque bears the BNM Codeencoded correctly on the face of the cheque and

corresponding to number printed at top right hand

cornerof the cheque.

E

nsure too that the cheque number is encodedcorrectly on the face of the cheque.

Back


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Drawers Signature

Ensure that the drawers signature conforms withthe authorised signature (specimen) as furnished tothe bank when the account was first opened.

When a cheque issued by the customer is notsigned or differs from the specimen, the cheque

should be returned to the payee or the collectingbank.

Can you apply some form of flexibility withrespect to this issue?

Back


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Payee

Cheque received for payment by encashmentthrough bankers counter can be either Bearer or

Order. If i t i s a bearer, ensure the bearer has

endorsed at the back of the cheque.

F

or an order cheque, identify the payee by referringto his identity card and request him to endorse at

the back of the cheque.

Back


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Crossing

Ensure that cheques received from other banks forpayment is stamped (crossed) on the face of the

cheque with the collecting banks crossing.

Otherwise the cheque should be returned to the

respective collecting banks.

What is meant by a crossing?

Back


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Writing or Printing

Cheque drawn must be in writing in the form of. Typewritten

Printed

Handwritten

Characters impressed by special cheque writing machine.

A cheque written in pencil is to be returned unpaid as it can bealtered.

How can you give an example of the above?

Back


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Alterations

Any alteration of the face of the cheque is no longeracceptable even if it is being endorsed by the

drawers full signature.

A new cheque has to be made out to replace the

previous cheque that had alterations.

What is the possible reason for this?

Back


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Mutilations

In the event that a cheque is accidentally torn, the drawersconfirmation or the collecting banks guarantee should be

obtained before paying it.

Paying for a cheque that is torn, even if its being pasted

together, without prior consultation and confirmation from the

drawer or collecting bank, the paying bank must suffer any

loss for taking such risk.

If you are confident that the pasted cheque is ok,

would you pay? Give your reasons.Back


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ANY QUESTION?

THE END

Documents

Part 1- What's a chq