On June 17, 2006, Mr. Cham wrote an order cheque of M. Sumarch for D500 drawn on Standard Chartered Bank, Bakau (a) State the drawer, the payee and the drawee from the above information. (b) The cheque is crossed "Account Payee only" and "Not Negotiable", Explain four effects of the crossing. (c) State three advantages of payment by cheque.
Explanation
(a)(i) The drawer is Mr. Cham (ii) The payee is Mr. Sumarch (iii) The drawee is the Standard Chartered, Bank, Bakau. (b) Effects of Crossing the Cheque. (i) Any cheque crossed cannot be cashed over the counter (ii) The cheque with Account payee can only be paid into the payee's Account and no other Account. (iii) Nobody can have a better title to the cheque than the payee because of the word "NOT negotiable". (iv) If stolen the cheques cannot be cashed by the holder. (v) If collected, the paying banker can trace the collector. (c) Advantages of payment by Cheque (i) Cheques are safer than using cash. (ii) Cheques can be made out for any amount (iii) The parties to the transaction do not have to meet since cheque can be sent by post. (iv) The counterfoil / stub serve as proof, record of payment/ receipt. (v) Cheques are convenient to carry about (vi) It can be traced or stopped in case of loss (vii) Cheques can be cashed from any branch of the same bank.
