CHEQUES, TYPES OF CHEQUES AND THEIR FEATURES

CHEQUES, TYPES OF CHEQUES AND THEIR FEATURES. Cheques, what is a cheque? The Bill of Exchange Act defines a cheque as: “A bill of exchange drawn on a banker payable on demand.” N

what are cheques?

In other words, a cheque is an order written by the drawer to a bank to pay on demand —- read more of demand and supply here—- a specified sum of money to the person named as payee on the cheque.

To complete a cheque, the drawer inserts the name of the payee, the amount he is to be paid in words and figures, date and signature.

types of cheques

Differences between a cheque and a bank note

A cheque is an instrument in writing made upon a bank to pay a given sum of money to a named person or bearer, at a specific date,

whereas bank notes are legal tenders that is, notes issued by the central bank to be legally used as means of payment for goods and services.

Features or characteristics of a cheque

  1. A cheque is an order to pay
  2. It an unconditional order
  3. The amount must be specified
  4. It must be in writing and not paid
  5. The account number of the drawer is stated
  6. The name and branch of the bank appear on the cheque
  7. It is addressed by one person to another
  8. The name of the payee must be shown on the cheque
  9. A stamp duty is paid on a cheque
  10. Amount must be clearly written in words and figures.

Advantages of payment by cheque

  •  Convenience: It is more convenient to carry cheque about than cash.
  •  Safe means of payment: Cheque is a safe means of payment, especially when it is crossed, the risk of loss is eliminated.
  •  A proof of payment: Cheque can serve as a receipt and a proof of payment.

  •  It saves time and energy: Using cheque to pay large sums of money saves time and energy of counting the cash.
  •  It helps to economize: Cheque can help to economize the use of currency notes and coins.
  •  Security: It is safer to carry cheque than cash for security reasons.
  • For record purposes: The drawer use the counter foil for proper record keeping of payments and receipts.
  • Easy to stop payment: It is very easy for the drawer to stop payment to prevent fraud.

Precautionary measures to be taken when drawing a cheque

  •  The signature must be consistent.
  •  The drawer must sign any alteration on the cheque.
  •  The cheque must not be folded.
  •  The amount must be written in figures and words.
  •  The name of the payee should be properly written on the cheque.
  •  The signature must be such that it cannot be easily forged.

Parties to a cheque

There are three major parties to a cheque. These are:

  • Drawer: Drawer is the person responsible for drawing a cheque. He is the owner of the account on which the cheque is drawn. The drawer is the debtor who signs the cheque and orders the bank to pay his creditor.
  •  Drawee: Drawee is the bank on which the cheque is drawn, i.e. the bank where the cheque will be presented for payment.

  1. economic tools for nation building
  2. budgeting
  3. factors affecting the expansion of industries
  4. mineral resources and the mining industries
  5. demand and supply
  6. types of demand curve and used
  7. advertising industry
  8. factors of production
  9. entrepreneur
  10. joint stock company
  11. public enterprises
  12. private enterprises
  13. limited liability companies
  14. migration
  15. population
  16. market concept
  17. money market
  18. shares
  19. how companies raises funds for expansion
  20.  

WEED AND THEIR BOTANICAL NAMES
1. ENVIRONMENTAL FACTORS AFFECTING AGRICULTURAL PRODUCTION
2. DISEASES
3. 52. SOIL MICRO-ORGANISMS
4. ORGANIC MANURING
5. FARM YARD MANURE
6. HUMUS
7. COMPOST
8. CROP ROTATION
9. GRAZING AND OVER GRAZING
10. IRRIGATION AND DRAINAGE
11. IRRIGATION SYSTEMS
12. ORGANIC MANURING
13. FARM YARD MANURE
14. HUMUS
15. COMPOST
16. CROP ROTATION

  1. IRRIGATION AND DRAINAGE
    19. IRRIGATION SYSTEMS
    20. INCUBATORS
    21. MILKING MACHINE
    22. SIMPLE FARM TOOLS
    23. AGRICULTURAL MECHANIZATION
    24. THE CONCEPT OF MECHANIZATION
    25. PROBLEMS OF MECHANIZATION
    26. SURVEYING AND PLANNING OF FARMSTEAD
    27. IMPORTANCE OF FARM SURVEY
    28. SURVEY EQUIPMENT
    29. PRINCIPLES OF FARM OUTLAY
    30. SUMMARY OF FARM SURVEYING
    31. CROP HUSBANDRY PRACTICES
    32. PESTS AND DISEASE OF MAIZE- ZEA MAYS
    33. CULTIVATION OF MAIZE CROP
    34. OIL PALM
    35. USES OF PALM OIL
    36. MAINTENANCE OF PALM PLANTATION
    37. COCOA
    38.
    39. PROCESSES IN COCOA CULTIVATION
    HOLING AND LINING
    40. YAM
    41. LAND PREPARATION FOR YAM
    42. DEPT OF PLANTING
    43. SPACING OF YAM
    44. PLANTING DEPT OF YAM
    45. STORAGE OF YAM
    46. STAKING OF YAM
    47. HARVESTING OF YAM
    48. COWPEA
    JUTE
    49. FORAGE CROP AND PASTURE
    50. FORAGE GRASSES
    51. SILAGE
    52. PASTURE
    53. TYPES OF PASTURE
    COMMON GRASSES AND LEGUMES
    54. GRASSES
    55. LEGUMES
    56. ESTABLISHMENT OF PASTURES
    57. 201. FORAGE PRESERVATION
    58. HAY SILAGE
    59. FORESTRY IMPORTANCE OF FORESTRY 206. FOREST MANAGEMENT FOREST REGULATION DEFORESTATION AFFORESTATION
    60. DISEASES AND PESTS OF CROPS
    61. MAIZE SMUT
    62. RICE BLAST
    63. MAIZE RUST
    64. LEAF SPOT OF GROUNDNUT
    65. COW-PEA MOSAIC
    66. COCOA BLACK POD DISEASE

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  1. BALANCED DIETS
    141. LACTATION DIETS
    142. MALNUTRITION
  2. RINDER PESTS
    148. NEWCASTLE DISEASE
    149. BACTERIA DISEASES
    150. ANTHRAX
    151. BRUCELLOSIS
    152. TUBERCULOSIS
    153. FUNGAL DISEASES
  3. PROTOZOAN DISEASES
    155. TRYPONOSOMIASIS

    159. TAPE WORM
    160. ROUND WORM OF PIGS
    161. LIVER FLUKE
    162. ECTO PARASITES
    163. TICK
    164. LICE

  • Payee: Payee is the person to whom the cheque is made payable, i.e. the person to whom payment is directed to be made. The payee is usually a creditor to the drawer and must present the cheque to the drawee for settlement.
  •  
  • For example, if Mr. Okafor writes a cheque to Mr. onyeka to be drawn from Zenith Bank Plc., in this transaction, Mr. Okafor is the drawer and Mr. onyeka is the payee while Zenith Bank Plc. Is the drawee.

TYPES OF CHEQUES

  1. Order cheque: Order cheque is made payable to a person or firm named on it, or an order which requires the endorsement of the payee unless he pays it into his own bank account. A cheque that is drawn payable to payee or to order can only be cashed by the payee. The payee can endorse it to another person and this turn it into a bearer cheque.
  • Bearer Cheque: Bearer cheque is payable to the bearer i.e. whoever presents it. The bearer cheques us payable without any endorsement. It can be cashed over the counter without having to be endorsed by the person presenting it.

  • Open cheque: Open cheque can be presented and cashed over the counter of the bank which it is drawn. Open cheque is not crossed. It is used for drawing cash from the bank paying the creditors who have no current account. This is risky because it can be paid to a wrong person.

  • Crossed cheque: This is a cheque having two parallel lines drawn across its face. Crossed cheque cannot be cashed at the counter; it must be paid into a current account. Some words may be written between the parallel lines, e.g. “ & Co” or “Non negotiable”. This helps to prevent fraudulent practices.

Forms of crossing a cheque

There are several types of crossing which can be used to place restriction on the negotiability of a cheque. They are:

  • General crossing: General crossing is a form of crossing in which two parallel transverse lines are drawn across the face of the cheque with or without the addition of the words “& Co” or “Non- negotiable”. This type of crossing prevents payments over the counter. The cheque can only be paid into a current account. There is no bank named on it.

  • Special crossing: In special crossing, the name of a bank is inserted between the transverse lines. This restricts payment to a specific named bank. The effect is to make the cheque payable only to the banker specified in the crossing. It is a« precautionary measure to make a cheque safer.

Other forms of special crossing
  • Non-negotiable: Non-negotiable is another form of special crossing in which the cheque cannot be paid to any person except the bearer of the name on the cheque. This phrase will deprive the cheque of its negotiability, i.e. prevents its further transfer. It is added to protect the owner against thieves.

  • A/C payee only: A/C payee only is a directive to the bank that the proceeds of the cheque are to be paid only into the account of the person or firm named on the cheque, i.e. the payee.

Any cheque with this form of crossing cannot be negotiated or transferred by endorsement to another person. It operates as notice to the collecting bank that only the account of the payee is to be credited.

Reasons for crossing a cheque
  1. It protects the owner against damage by loss or theft.
  2. It prevents the cheque from being paid over the counter.
  3. Crossing restricts a cheque to a particular bank.
  4. The holder of a crossed cheque must pay it to his account.
  5. It can help in tracing the culprit in case the cheque is stolen.

OTHER FORMS OF CHEQUES
  1. Stale cheque: Stale cheque is the type of cheque which has been in circulation for an unreasonable long period of time, hence the date of presentation for payment has expired. The bank will refuse to honour a cheque that is more than six months old because it is considered expired.

  1. Post-dated cheque: Post-dated cheques are cheques that bear a date later than the current date on which they are drawn, i.e. it is dated for some future time. Such a cheque cannot be cashed before the proper date.

  1. Dishonoured cheque: A dishonoured cheque is one which a banker, for some reasons has refused to pay on presentation. Such cheques generally have some explanatory phrase written on them
    stating the reason why such cheques cannot be paid or honoured.

Reasons for dishonouring a cheque
  •  Insufficient fund: A cheque can be dishonoured for lack of sufficient fund in
    the account.
  •  Irregular signature: A cheque will not be honored if the signature is not regular.

  •  Difference in figures and words: If the figures and the words on the cheque do
    not agree, the cheque will be rejected.
  • No date: A cheque can be dishonored if there is no date on it.
  • Bankruptcy: If the bank receives notice of default of drawer, It will reject the cheque.

  • Alteration of cheque: If alteration on the cheque is not signed against by the drawer, the bank will not honour it.
  • Mutilation of cheque: When the cheque is mutilated, it will be dishnoured

  • Stoppage of payment: If payment is stopped by the drawer, the cheque will not be honoured
  1. economic tools for nation building
  2. budgeting
  3. factors affecting the expansion of industries
  4. mineral resources and the mining industries
  5. demand and supply
  6. types of demand curve and used
  7. advertising industry
  8. factors of production
  9. entrepreneur
  10. joint stock company
  11. public enterprises
  12. private enterprises
  13. limited liability companies
  14. migration
  15. population
  16. market concept
  17. money market
  18. shares
  19. how companies raises funds for expansion
  20.  

WEED AND THEIR BOTANICAL NAMES
1. ENVIRONMENTAL FACTORS AFFECTING AGRICULTURAL PRODUCTION
2. DISEASES
3. 52. SOIL MICRO-ORGANISMS
4. ORGANIC MANURING
5. FARM YARD MANURE
6. HUMUS
7. COMPOST
8. CROP ROTATION
9. GRAZING AND OVER GRAZING
10. IRRIGATION AND DRAINAGE
11. IRRIGATION SYSTEMS
12. ORGANIC MANURING
13. FARM YARD MANURE
14. HUMUS
15. COMPOST
16. CROP ROTATION

  1. IRRIGATION AND DRAINAGE
    19. IRRIGATION SYSTEMS
    20. INCUBATORS
    21. MILKING MACHINE
    22. SIMPLE FARM TOOLS
    23. AGRICULTURAL MECHANIZATION
    24. THE CONCEPT OF MECHANIZATION
    25. PROBLEMS OF MECHANIZATION
    26. SURVEYING AND PLANNING OF FARMSTEAD
    27. IMPORTANCE OF FARM SURVEY
    28. SURVEY EQUIPMENT
    29. PRINCIPLES OF FARM OUTLAY
    30. SUMMARY OF FARM SURVEYING
    31. CROP HUSBANDRY PRACTICES
    32. PESTS AND DISEASE OF MAIZE- ZEA MAYS
    33. CULTIVATION OF MAIZE CROP
    34. OIL PALM
    35. USES OF PALM OIL
    36. MAINTENANCE OF PALM PLANTATION
    37. COCOA
    38.
    39. PROCESSES IN COCOA CULTIVATION
    HOLING AND LINING
    40. YAM
    41. LAND PREPARATION FOR YAM
    42. DEPT OF PLANTING
    43. SPACING OF YAM
    44. PLANTING DEPT OF YAM
    45. STORAGE OF YAM
    46. STAKING OF YAM
    47. HARVESTING OF YAM
    48. COWPEA
    JUTE
    49. FORAGE CROP AND PASTURE
    50. FORAGE GRASSES
    51. SILAGE
    52. PASTURE
    53. TYPES OF PASTURE
    COMMON GRASSES AND LEGUMES
    54. GRASSES
    55. LEGUMES
    56. ESTABLISHMENT OF PASTURES
    57. 201. FORAGE PRESERVATION
    58. HAY SILAGE
    59. FORESTRY IMPORTANCE OF FORESTRY 206. FOREST MANAGEMENT FOREST REGULATION DEFORESTATION AFFORESTATION
    60. DISEASES AND PESTS OF CROPS
    61. MAIZE SMUT
    62. RICE BLAST
    63. MAIZE RUST
    64. LEAF SPOT OF GROUNDNUT
    65. COW-PEA MOSAIC
    66. COCOA BLACK POD DISEASE

check out these recent posts

  1. BALANCED DIETS
    141. LACTATION DIETS
    142. MALNUTRITION
  2. RINDER PESTS
    148. NEWCASTLE DISEASE
    149. BACTERIA DISEASES
    150. ANTHRAX
    151. BRUCELLOSIS
    152. TUBERCULOSIS
    153. FUNGAL DISEASES
  3. PROTOZOAN DISEASES
    155. TRYPONOSOMIASIS

    159. TAPE WORM
    160. ROUND WORM OF PIGS
    161. LIVER FLUKE
    162. ECTO PARASITES
    163. TICK
    164. LICE

  • Stale cheque: A cheque that has expired will be dishonoured.
  • Certified cheque: A certified cheque is a cheque which has been ratified by the bank in order to guarantee that the drawer has sufficient funds in the account to settle debt. A bank also ratifies a cheque in order to authenticate it.

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