Definition
A crossed cheque is a type of cheque that has two parallel lines drawn across the upper left-hand corner or the entire face, with the purpose of specifying that the funds must be deposited directly into a bank account rather than being immediately cashed at the bank counter. This safety measure is generally used to reduce the possibility of fraud and ensure that payments go directly to the intended recipient’s bank account.
There are usually two types of crossings:
- General Crossed Cheque: Indicated by simply drawing two parallel lines. This form doesn’t specify any bank, meaning it can be deposited into any bank account.
- Special Crossed Cheque: Includes the name of a particular bank between the parallel lines, which means the cheque can only be deposited at the specified bank.
Examples
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General Crossing Example: A cheque with “—-//—-” drawn across its face. This cheque can be deposited into any bank account.
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Special Crossing Example: A cheque with “—-//Bank of America—-” drawn across its face. This cheque can only be deposited at a Bank of America account.
Frequently Asked Questions (FAQs)
What is the purpose of a crossed cheque?
The purpose of a crossed cheque is to reduce the risk of fraud by ensuring that the funds can only be deposited into a bank account rather than being cashed over the counter.
Can a crossed cheque be cashed?
No, a crossed cheque cannot be cashed directly over the counter; it must be deposited into a bank account.
How do you cross a cheque?
To cross a cheque, draw two parallel lines across the upper left-hand corner or the face of the cheque. For special crossing, add the name of the intended bank between the parallel lines.
Can a crossed cheque be deposited in any bank?
A generally crossed cheque can be deposited in any bank. However, a specially crossed cheque must be deposited into the bank which is specified in the crossing.
Are crossed cheques safer?
Yes, crossed cheques are considered safer as they reduce the risk of fraud and ensure that funds are deposited directly into the beneficiary’s bank account.
- Cheque: A written order directing a bank to pay a specific amount of money to the person named on the cheque or to the bearer.
- Bearer Cheque: A cheque that can be presented by anyone bearing it, without the need for further identification.
Online Resources
Suggested Books for Further Studies
- “Accounting: What the Numbers Mean” by Marshall, McManus, and Viele
- “Principles of Accounting” by Belverd E. Needles
- “Financial Accounting: Tools for Business Decision Making” by Paul D. Kimmel, Jerry J. Weygandt, and Donald E. Kieso
Accounting Basics: “Crossed Cheque” Fundamentals Quiz
### What is the main purpose of a crossed cheque?
- [ ] To allow cash withdrawal directly from the bank counter.
- [x] To ensure the cheque can only be deposited into a bank account.
- [ ] To specify the payee of the cheque.
- [ ] To denote the issuance date of the cheque.
> **Explanation:** The main purpose of a crossed cheque is to ensure that the funds can only be deposited into a bank account, thereby reducing the risk of fraud.
### How many types of crossing are there in cheques?
- [ ] One
- [ ] Four
- [x] Two
- [ ] Three
> **Explanation:** There are two main types of crossings for cheques: general crossing and special crossing.
### Can a generally crossed cheque be deposited into any bank account?
- [x] Yes
- [ ] No, it can only be deposited into a specified bank
- [ ] It depends on the bank’s policies
- [ ] Only if it is bearer cheque
> **Explanation:** A generally crossed cheque can be deposited into any bank account and does not specify a particular bank.
### How is a special crossing indicated on a cheque?
- [x] By naming a specific bank between the parallel lines crossing the cheque.
- [ ] By drawing a single line across the cheque.
- [ ] By writing “No cash” on the cheque.
- [ ] By inserting the payee's name.
> **Explanation:** A special crossing includes the name of a particular bank between the parallel lines, thus indicating it can only be deposited at that bank.
### What should one do if they wish for their cheque to be deposited only in a specific bank?
- [ ] Use a general crossing
- [x] Use a special crossing
- [ ] Indicate "Deposit Only" on the cheque
- [ ] Write the payee name handwritten as large as possible.
> **Explanation:** If one wishes for their cheque to be deposited only in a specific bank, they should use a special crossing which names the bank within the parallel lines.
### Which crossing indicates that a cheque can be deposited electronically without specifying a bank?
- [x] General Crossing
- [ ] Special Crossing
- [ ] Urgent Processing
- [ ] Immediate Clearing
> **Explanation:** A general crossing, indicated by two parallel lines, allows for the cheque to be deposited electronically without specifying any bank.
### What action is NOT permissible with a crossed cheque?
- [ ] Depositing it into a bank account
- [ ] Endorsing it to another party
- [x] Cashing it over the counter at a bank
- [ ] Using it as a proof of payment
> **Explanation:** A crossed cheque cannot be cashed over the counter at a bank; it must be deposited into a bank account.
### Who usually draws the parallel lines on the cheque for cross purposes?
- [x] The issuer of the cheque
- [ ] The bank teller
- [ ] The payee
- [ ] The holder in due course
> **Explanation:** The issuer of the cheque usually draws the parallel lines to indicate a crossing.
### Crossed cheques are generally preferred in business transactions over bearer cheques because of:
- [ ] Decorative purposes on the cheque.
- [ ] Compatibility with ATM withdrawals.
- [ ] Easier immediate cash access.
- [x] Increased security in ensuring the cheque is deposited into a bank account.
> **Explanation:** Crossed cheques are generally preferred in business transactions over bearer cheques due to increased security, ensuring the cheque is deposited into a bank account.
### What is a common indicator of a general crossing on a cheque?
- [x] Two parallel lines across the cheque
- [ ] Inclusion of the signer’s initials
- [ ] Specifying "or bearer" after the payee's name
- [ ] A series of multiple endorsements
> **Explanation:** A common indicator of a general crossing is the presence of two parallel lines across the cheque, which ensures it can only be deposited into a bank account.
Thank you for exploring the concept of the crossed cheque through this foundational knowledge. Continue to pursue excellence in your financial acumen!
