Note on Types Of Cheque And Meaning of Cash Book

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Types / Modes of crossing

1. General Crossing:

Generally, cheques are crossed when there are two transverse parallel lines, marked across its face or the cheque bears an abbreviation "& Coopration" between the two parallel lines or the cheque bears the words "Not Negotiable” between the two parallel lines or the cheque bears the words "A/c Payee" between the two parallel lines.

A crossed cheque can be made a bearer cheque by cancelling or erasing the crossing and writing that the crossing is cancelled and affixing the full signature of drawer.

2. Special or Restrictive Crossing

When a certain bank's name is written in between the two parallel lines, then the cheque are said to be specially crossed. In addition to the word bank, the words "A/c Payee Only”, "Not Negotiable" may also be written. The payment of those cheques are not made unless the bank had named in crossing is presenting the cheque. The effect of special crossing is that the bank makes payment only to those bankers whose name are written in the crossing. Specially, the crossed cheques are more safer than the generally crossed cheques.

Endorsement of cheque

The payee named on a cheque endorses the cheque on the back of the cheque by writing their name exactly same as it is written in front of the cheque. Signing the back of the check completes negotiation of the item allowing the transfer of money as ordered by the cheque.

When more than one person are listed on the cheque as the Payee, then the requirements for endorsement all depends on how those names are written. If the check indicates Mr. John Doe andMr. Jane Doe, then both person must have to sign the cheque. If the cheque indicates John Doe or Jane Doe, then only one signature is required. If the two names are listed and the words that are "and" or "or" are not shown on the cheque , then assume "and".

  1. Blank Endorsement: A blank endorsement is when the recipient of the check signs his name on the back of the check. Once the check is signed, it can be used in a similar manner to cash.
  2. Restrictive Endorsement: A restrictive endorsement specifies the way in which a check can be negotiated. The most common form of restrictive endorsement is "For Deposit Only," which renders a check unable to be cashed.
  3. Conditional Endorsement: The endorser uses a conditional endorsement to specify a condition that must be met before the check can be cashed, such as "Payable to Bob Smith after the lawn is mowed." Institutions typically won't accept conditionally endorsed checks because they have no way of verifying if the condition has been met.
  4. Special Endorsement: The person receiving the check uses a special endorsement to turn over the funds to another person by writing something like "Pay to the Order of Jane Doe, Signed John Doe."
  5. Qualified Endorsement: The person negotiating the check uses a qualified endorsement to attempt to remove any responsibility for the check being returned for insufficient funds by writing "without recourse" after her signature. Banks do not accept this type of endorsement because depositors are always financially responsible for insufficient deposits.

Condition for honouring cheque

The bank should pay the amount mentioned on the cheque as soon as it is presented. If the amount of cheque is paid by the bank to the payee, the cheque is said to be honoured. If the bank refuses to pay the amount of cheque, then the cheque is said to be dishonoured. Thus, the dishonoured of the cheque means the refusal by the bank to pay the amount of cheque to the person or the payee. It is a condition or the situaton in which the bank does not pay or refuses to pay the amount of the cheque to the payee. In fact, when the drawer draws the cheque without following all the rules of issuing cheque or when the drawee draws the cheque more than the bank balance then the bank dishonours the cheque.

Following are the some important reasons for dishonouring a cheque

  • If the date is not written on the cheque or written incorrectly on the cheque or the date given is of three months before or if the advance date is given.
  • If the name of the payee or the person is not written on the cheque or not written clearly on the cheque.
  • When the ordered or crossed cheques are transferred without proper endorsement and delivery.
  • If the amount or figures are not written in words or not written properly or written incorrectly or if the amount written in words and figures does not match with each other.
  • If the alteration made on the cheque is not proved by the drawer giving signature.
  • If the account number is not mentioned or if it is not clear or if it is not mentioned clearly.
  • If signature isnot given or if the signature given in the cheque do not match with the signature which is given on the signature specification card that are kept by the bank.
  • If the amount that are mentioned on the cheque are more than the amount that the drawer has in his bank account or if as per bank's rule the minimum balance in the account of the drawer cannot remain. If the cheque is overwritten.
  • If the cheque is not found in proper condition or it is found wet, torn or spotted.
  • If the drawer has given order to the bank to stop payment of the cheque.
  • If the court of law orders the bank to stop payment of the cheque.
  • When the balance of bank remains shortage on an account for not collecting the cheque deposited.
  • If the drawer has already closed hisaccount before presenting the cheque.

Objectives and importance of cash and banking transactions

A business must have strict financial tides and accounting system to perform, record, report and control the cash and banking transactions. Proper recording and accounting of cash and banking transactions are important to achieve the following objectives: :

  • To have systematic and permanent record of all cash and banking transactions in a separate book.
  • To obtain reliable and detailed information of all cash receipts and payments easily and immediately.
  • To keep effective control over misappropriation of cash and banking transaction.
  • To know the main sources and heads of payment of cash.
  • To know cash and bank balances.
  • To help to prepare cash budget and to avoid the possibility of having excess or shortage of cash.
  • To make the cashier and other concerned officers accountable for all cash and banking transactions.

Meaning of cash book

Cash book is a book of original entry in which transactions which refers only to cash receipts and payments are recorded properly in detail. When cash are received, then they are entered at the debit side or the left hand side of the cash book. Similarly, when the cash is paid out, the same is recorded at the credit side or the right hand side of the cash book.

Although, the cash book serves the purpose of a cash book of original entry, cash journal represents the cash account of the ledger which are separately bounded for the sake of convenience. It can be called more a ledger than a journal. It is a journal as cash transactions are chronologically recorded in it. It is a ledger because it contains a classified record of all the cash transactions. All the balances of cash book are properly recorded in the trial balance and the balance sheet. A general specimen of cash book can be given as below

Receipt Payment

Date

Particulars

LF

Amount

Date

Particulars

LF

Amount

A brief explanation of each column used in the cash book can be given below:

  1. Particulars: It is a column where the name of the opposite account are written (the second aspect of cash \ transaction). Below this, the narration of the transaction is written.
  2. L.F. (Ledger Folio): In this column, the page number of the ledger where the concerned (opposite) account has been opened, are written. This will help to locate the account from the Ledger. It may be writtenthat in a Ledger account J.F. is written as only reference, while in a Cash Book L.F. is written. It \ IS so, because cash transactions are not recorded in any Journal.
  3. Amount (Rs): The amount of the transaction is recorded in this column. The amount of cash received is recorded on the debit side in amount column and the amount of cash paid is recorded on the credit side in amount column.

Jogender Goet, Bhesh Raj Banjade, 2012)

Bibliography

goet, J. (2012). Principal of accountinh. kalimati, kathmandu: Dreamland publication.

Types / Modes of crossing

1. General Crossing:

Generally, cheques are crossed when there are two transverse parallel lines, marked across its face or the cheque bears an abbreviation "& Co. "between the two parallel lines or the cheque bears the words "Not Negotiable” between the two parallel lines or the cheque bears the words "A/c. Payee" between the two parallel lines.

2. Special or Restrictive Crossing

When a certain bank's name is written in between the two parallel lines, then the cheque are said to be specially crossed. In addition to the word bank, the words "A/c Payee Only”, "Not Negotiable" may also be written. The payment of those cheques are not made unless the bank had named in crossing is presenting the cheque. 

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