Cheques

A cheque is an instrument of payment instructing a financial institution to pay a

specific amount to the holder of the cheque (payee)
Cheques can be Postdated meaning that it cannot be cashed until the date written
on it

Other Types of Cheques

1. Post-dated cheques – When you want to make a purchase so that your account is
debited at a later date you can make out a post-dated cheque. For example you may
purchase goods on 1st December but make the cheque payable from 15th December
because you are short of funds or because you want to check the goods are of good
quality before the payment is taken from your account.
2. Certified/manager’s cheques – This is a cheque signed by a bank manager or other
senior officer in a bank on behalf of one of its customers. The customer will ask for a
manager’s cheque in order to purchase goods in situations where the supplier wants a
cast-iron guarantee that cheque payment will be honoured.
3. Counter cheques – A customer can ask for a cheque to be made up on their behalf at
the counter of their bank. Their account will only be debited when the receiver of the
Cheques

cheque pays the cheque into a bank and the cheque is sent to the bank where the
cheque was drawn.
4. Endorsements – To endorse a cheque means to write a written instruction on the back
and sign it. For example, if Pearline Dean receives an open cheque for $20.00, she could
write on the back of it :

I endorse this cheque in favour of the Boot and Shoe Company.

The Boot and Shoe Company has effectively received a payment worth $20.00 that it can
deposit in its bank.
Activity: Based on the types of cheques, match the right cheque to the right description
Open cheque Has a written instruction on the back

Post- dated cheque An unsafe way of making a payment

Manager’s cheque Funds come out after a purchase is

made

Counter cheque Non-negotiable method of payment

Crossed cheque Cast-iron guarantee that the cheque will be

honoured

Endorsements Cheque is made up at the counter of

the
 Cheques

Bank

Parties Relating to Cheques and Bank Drafts

The following parties are involved in a cheque.
An example of these parties is provided in the box to the side
1. Drawer – The person who the cheque is coming from
2. Drawee – The bank from which the payment will be made
3. Payee – The person who the cheque is written out to

E.g. Suppose you are working in a Company. At the end of the month, the Company pays your
salary through Cheque. You go to the bank to encash the cheque. Bank will deduct money from
company’s bank account and will deposit to your bank account. Here you see that your company
directed the bank to deduct money from its bank account and deposit to your bank account.
Here, the Bank is “Drawee”, your company which issued cheque is “Drawer”, and you, who
receive money through bank, are the Payee.

Activity:
1. Can you identify the payee, drawee, and drawer in a situation?
Read the following scenario and decide who is the payee, who is the drawee and who is the
drawer.
The Cayman Islands Government pays new members of staff via cheque. In paying its staff the
monies is taken from its account with the Royal Bank of Canada (RBC). Who is the
Payee __________________________
Drawer ___________________________
Drawee ___________________________
Cheques

2. Try to fill in the information on the blank cheque in the activity below.
On February 2019 you purchased 24 cases of Ginger Ale at $12.00 per case from Du Boulay’s
Bottling Company Limited, and you paid for this transactions with the cheque