What is Cheque?

A Cheque may be defined as an unconditional order drawn upon a specified banker, singed by the maker, directing the banker to pay on demand a certain sum of money only to the order of a person or to be the bearer of the instrument. When a trader wants to discharge his debts he sings a written order on his bank authorizing the bank to pay a certain sum of money to his creditor. The order is known as cheque. The cheques are drawn on printed forms made up into book and are supplied by the bank to the customer whenever required. There are three parties to a cheque, namely, Drawer, Drawee and Payee. Those three parties to a cheque are explained as under.

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  • Drawer: The person who draws the cheque is known as the drawer. The person whose name the account stands is the drawer.
  • Drawee: The bank on which the cheque is drawn is known as the drawee.
  • Payee: The person in whose favor the cheque is made payable is the payee. If the cheque is drawn payable to self, the drawer himself would be the payee of the cheque.

Before the bank makes payment on the cheque it ensures itself that the cheque is in order.

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