Tuesday, May 1, 2012

Cheque and Demand Draft

Definition of a Cheque "Cheque is an instrument in writing containing an unconditional order, addressed to a banker, sign by the person who has deposited money with the banker, requiring him to pay on demand a certain sum of money only to or to the order of certain person or to the bearer of instrument."

Different Kinds / Types of Cheques
·         Bearer Cheque:When the words "or bearer" appearing on the face of the cheque are not cancelled, the cheque is called a bearer cheque. The bearer cheque is payable to the person specified therein or to any other else who presents it to the bank for payment. However, such cheques are risky, this is because if such cheques are lost, the finder of the cheque can collect
payment from the bank.
·         Order Cheque:When the word "bearer" appearing on the face of a cheque is cancelled and when in its place the word "or order" is written on the face of the cheque, the cheque is called an order cheque. Such a cheque is payable to the person specified therein as the payee, or to any one else to whom it is endorsed (transferred).
·         Uncrossed / Open Cheque:When a cheque is not crossed, it is known as an "Open Cheque" or an "Uncrossed Cheque". The payment of such a cheque can be obtained at the counter of the bank. An open cheque may be a bearer cheque or an order one.
·         Crossed Cheque: Crossing of cheque means drawing two parallel lines on the face of the cheque with or without additional words like "& CO." or "Account Payee" or "Not Negotiable". A crossed cheque cannot be encashed at the cash counter of a bank but it can only be credited to the payee's account.
·         Anti-Dated Cheque:If a cheque bears a date earlier than the date on which it is presented to the bank, it is called as "anti-dated cheque". Such a cheque is valid upto six months from the date of the cheque.
·         Post-Dated Cheque:If a cheque bears a date which is yet to come (future date) then it is known as post-dated cheque. A post dated cheque cannot be honoured earlier than the date on the cheque.
·         Stale Cheque:If a cheque is presented for payment after six months from the date of the cheque it is called stale cheque. A stale cheque is not honoured by the bank.

what is the difference between cheque and draft
·         The bank  takes a advance from the person who issues a draft but at the time of check the bank didn’t take amount to issue a cheque.the cheque may be bounce when the balance is nill in issuer account .
·         A draft can be issued only when the amount of the draft is submitted to the bank. Whereas a cheque can be issued irrespective of whether there is balance in the issuer's account or not.
·         Cheque and DD, both are negotiable instruments and to be honored.  But the basic diffrence is, check will be issued by an account holder and whereas DD can be issued by a banker only.... Cheque may get rejected due to lot many reasons....but DD will not get rejected if u present.  ,
·         Any one Can presume the Draft from bank in favor of others but Cheque is not like that, to Issue cheque to others you should maintain A/c with bank.
·         cheque is like postpaid and the draft is like prepaid. means if you need to create the draft u have to pay first to bank then bank will issue the draft. and in case of cheque it is not needed that your account must have the balance.

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