KINDS OF BANKING INSTRUMENTS

KINDS OF BANKING INSTRUMENTS

Deposits Cheques Demand

or pay-in-slip

drafts Debit and credit note Vouchers

DEPOSITS AND WITHDRAWALS SLIP:
The deposits are made by filling up a pay-inslip. The form of the pay-in-slip is: •It is used to deposit money in the bank and returned to the depositor. •It has the signature of the cashier, as receipt. •It gives the details regarding the date, the amount deposited.

CHEQUES
A cheque is an unconditional order on the bank made by the client instructing the bank to pay a certain sum of money to the person named in the cheque or his order or the bearer. This instrument is very safe and convenient method of making payments or withdrawing money from a bank.

TYPES OF CHEQUES
1.OPEN CHEQUE 2.CROSSED CHEQUE

OPEN CHEQUE:
An open cheque is one which is payable across the counter of the bank. It need not be paid through a bank. It can be encashed at the counter of the bank. An open cheque can further be of two types: a.BEARER CHEQUE: When a cheque is payable to a person named in the cheque or to the bearer thereof, it is called a bearer cheque.

For e.g. “pay to Rakesh Kumar Garg or bearer.” Such a cheque may be paid to Rakesh Kumar Garg at the counter of the bank when he presents it for payment. Mr. Rakesh Kumar Garg can either himself go to bank for getting payment or simply he may or may not sign at the back side of the cheque and hand it over to any person. Any person can go to the bank and collect its payment. The drawee bank need not take any pains to get the identification of the person to whom the payment to whom the payment is being made. A bearer cheque is transferable merely by delivery.

b.ORDER CHEQUE: An order cheque is payable to the person named in the cheque or his order. For e.g. “pay to Rakesh Kumar Garg or order.” Such a cheque is payable to either Rakesh Kumar Garg or to any person whom he orders the payment of the cheque. Order cheque is paid by the bank only when the bank is satisfied about the identity of the payee. An order cheque is not transferable merely by delivery. It cannot be transferred without the signatures of the transferor.

CROSSED CHEQUE:
A crossed cheque is one on which two parallel transverse lines with or without the word ‘& co.’ ‘not negotiable’…etc. are drawn. A crossed cheque is not payable across the counter of the bank. It must be collected through a bank. It is paid into the bank account of a person and cannot be encashed at the counter of the bank. By crossing cheques safety is ensured and the person to whom payment is eventually made can be traced because such a cheque is always paid into a bank account. A crossed cheque provides protection not only to the holder of the cheque but also to the receiving and collecting bankers.

Types of Crossing
a) b)

General Crossing Special Crossing

Other Types of Crossing
1. 2. 3.

Restrictive Crossing Not Negotiable Crossing Double Crossing

BANK DRAFT:
Bank draft is a bill drawn either on demand or otherwise by one banker on another in favour of a third party or by one branch of a bank on another branch of the same bank or by the head office of a branch or vice versa for a sum of money payable on demand or order. It is also known as demand drafts as they are always payable on demand without any days of grace and there cannot be any bearer drafts. They are always used as a mode of remittance by parties for sending money from one place to another. For the preparation of this draft bank charges a nominal commission for this service.

DIFFERENCE BETWEEN CHEQUE AND DEMAND DRAFT DEMAND DRAFT

CHEQUE

It cannot be made payable to bearer. Its payment cannot be stopped. It is drawn by a bank upon itself.

It may be drawn payable to bearer. It is countermanded as in case of a cheque. A cheque is drawn by one person upon another

DEBIT NOTE
It is a document evidencing that a debit to be raised against a party for other reasons, for e.g., when goods are returned to a supplier or when an additional amount is recoverable from a customer.

CREDIT NOTE
It is made out when a party is to be given a credit except against the bill already received from it. When goods are received back from a customer, a proper credit note should be given to him.

VOUCHER
It is a document providing evidence of some business transaction. It is clear from the above definition that whenever a transaction takes place, an evidence to that effect is also established Types of vouchers: a.Source vouchers b.Accounting vouchers

MEANING The act of drawing two parallel transverse lines on the face of a cheque is called crossing of a cheque. It is a direction to the banker not to pay the cheque across the counter of the bank but to pay to a bank only or to particular bank in account with the bank. The amount in this cheque is paid into the bank account of the respective person whose name is being mentioned on the cheque. Types of crossing: a)General crossing b)Specific crossing

GENERAL CROSSING
General crossing implies simply putting two parallel transverse lines on the face of cheque. According to section 123 of the negotiable instruments act, 1881 says, “where a cheque bears across its face an addition of the words ‘and company’, or any abbreviation thereof; between two parallel lines or just two lines without any negotiation will be considered a generally crossed cheque.The effect of general crossing is that payment of such a cheque cannot be obtained at the counter of the bank, it can only be obtained through a banker.

SPECIAL CROSSING
A special crossing implies a direction written on the face of a cheque to pay the cheque only if it is presented through a particular bank mentioned therein. the cheque is deemed to be crossed specially. In this the amount is transferred to the mentioned name a/c.

RESTRICTIVE CROSSING:
It constitute a direction to the collecting banker to collect the cheque and credit the proceeds to the account of the payee only. Such a crossing is known as RESTRICTIVE CROSSING. The collecting bank has to credit the account of the payee in whose favour the cheque is drawn.

It makes the cheque non transferable but the effect of such a crossing is that when the holder to a cheque transfers it to any other person the transferee does not get a better title than the transferor had even though the transferee is a bonafide person who takes the instrument for a valid consideration and before the maturity of the instrument.

NOT NEGOTIABLE CROSSING:

DOUBLE CROSSING:

PERSONS WHO MAY CROSS A CHEQUE:
A cheque may be crossed by any of the following: 1. The drawee of the cheque 2. The holder of the cheque 3. The collecting banker

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