Page 78 - Account 10

Cheque

14. Introduction
A bank accepts deposits of persons and institutions for the purpose of lending loan
or investing in terms of capital. The persons and organizations deposit their temporarily
idle money into various banks and withdraw it frequently through a formal and valid
instrument. A cheque is one of the popularly used instruments used in withdrawing
money from the bank. Since the money deposited into a bank is the depositor’s own
money, he/she can at any time place an order in written form to his/her bank to pay
certain amount of money. Such an order is known as cheque. A cheque does not mention
any condition and must not mention it in the order. The bank is liable to pay money
whenever it is demanded. Thus, a cheque may be defined as an unconditional order made
by the depositor or client to a specified banker to pay on demand a certain sum of money
mentioned in it to the ordered person or to the bearer of the instrument. Only the holder
of A/c in the bank can make it.
In order to enforce the drawers for making the orders in an identical form and format,
the bank provides printed pad of blank cheques to the depositor at the time of opening
account with the bank for withdrawing their money as and when needed. Each pad or
book of cheque contains some sheets of paper along with an application form at the last.
After cheque book is finished, one should submit an application by filling up the form to
get a next cheque book or pad of cheque.
From the study of the above definitions, a cheque may contain the following essentials:
i. A cheque is an unconditional order. The mentioning of condition creates the problem
of proving the condition, which is not possible.
ii. It must be drawn upon a specified banker. If one draws cheque of Nepal Bank Ltd.
upon Rastriya Banijya Bank, it does not become valid and will not be accepted.
iii. It must be signed by the drawer i.e. the cheque writer or the depositor, otherwise it
cannot be authentic and valid to get the payment. ‘
iv. It must clearly mention a definite sum of money and that must be equal or less than
the balance remained in the drawer’s A/c.
v. The amount mentioned in the cheque is payable only on demand. It means that the
amount is payable only, if the cheque is presented to the bank counter.
vi. The cheque is made payable either to the drawer himself or to his ordered person or
to its bearer.

Key Point A cheque is defined as an unconditional order drawn by a person or firm
to a specified bank for the payment of a certain amount of money to the
person specified in it or to the holder of this instrument.

15. Parties Involved in a Cheque

There are mainly three parties involved in the total performance of a cheque.

Aakar’s Office Practice and Accountancy - 10
78 78 Aakar’s Office Practice and Accountancy - 10 Financial Institutions 79