Types of cheques
The cheques are of two types. (i) Open cheques and (ii) crossed cheques.
(i) Open Cheques. Open cheques are those cheques which are paid across the counter of the bank. Open cheques may be bearer or order cheques.
(a) Bearer cheques. If a drawer orders the bank to pay a stated sum of money to the bearer it is called a bearer cheque. Any person who lawfully possesses a beaker cheque is entitled to receive payment of that cheque.
(b) Order cheque. If a cheque is to the order of a person in whose favor the cheque is drawn it is called order cheque. The order cheque is paid by the bank only when the bank is satisfied about the identity of the payee.
(ii) Crossed Cheques. If a cheque is crossed by drawing two parallel lines across the face of the cheque, with or without the words & Co or A/c payee only, it is called a crossed cheques. The crossed cheque cannot be paid on the counter of the drawee bank. It will be deposited in the account of a person in whose order or favor it is drawn.
Kinds of crossing
Legally there are two kinds of crossing (a) General Crossing and (b) Special Crossing.
(a) General Crossing. The drawing up of two simple parallel transverse lines on the face of the cheque at the top left hand corner with or without the words & Co. Not negotiable or Account Payee only is known as general crossing. The effect of general crossing is that the crossed cheque cannot be paid at the counter of the bank. Its payment can only be deposited into the payee’s account only.
(b) Special Crossing. A cheque is deemed to be crossed especially when it bears across its face the name of the banker either with or without the words ‘Not Negotiable’. In case of special crossing the payment can only be made to the bank named therein the cheque.
Objectives of crossing. The cheque is crossed to achieve the following objectives;
(i) It prevents the payment of the cheque to a wrongful holder.
(ii) It ensures safe payment to the concerned receiver.
(iii) It facilitates in tracing the recipient of the payment if the cheque is wrongfully crossed.
(iv) Further it is a guard against any cheating or theft.
Importance of cheques
(i) A cheque is a convenient and safe method of making payments.
(ii) Cheques facilitate transfer of funds from one place to another and from one country to another country.
(iii) The use of cheques provides safety to money deposited into bank.
(iv) Payment by cheque can serve the purpose of receipt also.
(v) There is saving in the use of currency notes by the use of cheques.
(v) Cheques facilitate credit which in turn helps in the growth of business in the country.