A cheque is an important document that almost everyone has to deal with in their day-to-day lives, and yet, many people do not realize what makes it so vital. A cheque is a legal assignment made by the holder (the payee) to the drawer (the payor) at the sight of which the bank credits the drawer’s account with the amount paid by it. When you write a cheque, you are really sending the money from your account to another. That’s why cheques are essential to any business that pays its employees or suppliers. You will also see many other businesses using cheques for bookkeeping, purchasing, and other transactions. Hence If you are an accounting student or a business owner you will deal with cheques frequently. While understanding the essential features of a may not be as difficult as other aspects of accounting like the voucher payment format, they are certainly crucial. Hence here we take the time to learn about the most important characteristics of a cheque in detail:
Must be in writing
A cheque is not a personal letter. It must be in writing, preferably on official paper with the signature of the drawer, or it will not be honored. There are many ways of doing this but it should always be done the same way for each person and for each cheque. A cheque must be in writing, signed by its issuer, and countersigned by the drawee bank. It should also contain details of the intended payee(s) (so that they can verify the payment), as well as any other information required by law (such as a memo or reference number). A cheque cannot be oral in nature.
The amount written up in your bank account for payment must be unconditional (i.e., without any conditions attached). If you give someone a cheque for 100,000 and say: “I don’t expect to get that back,” then you have put a condition on the money and if they do not pay up, they can sue you (in which case they can tell their side of the story). But if everything is clear and simple (you know exactly how much they owe) then there is no way they could sue you if they don’t pay up!
Must be signed by the drawer
The most important feature of a cheque is that it must be signed by the drawer. This is because the signature on a cheque is considered to be evidence that the person who wrote it had sufficient funds in his account to make such a withdrawal. A cheque without a signature cannot be honored by the bank, which will only accept one with a handwritten signature.
You need two signatures when writing out your check: one for yourself and one for whoever you’re paying with the check. Your signature should be in ink and should be clear enough that anyone who sees it can easily read it (for instance, if someone has poor eyesight). Your signature should also match exactly what is written on the back of your check (so if there is no back left blank for your signature, don’t use an image or picture).
Should have a cheque number
The other essential feature of a cheque is that it should have a cheque number. A valid cheque will have this number written at the bottom of its front face and also on its back side in case of an endorsement or transfer of ownership of the instrument.