Theory question 108
BankingCommerce 2 (essay)
On June 17, 2006, Mr. Cham wrote an order cheque for 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.
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(a) Drawer – Mr. Cham; payee – M. Sumarch; drawee – Standard Chartered Bank (Bakau).
(b) Any four: it cannot be cashed over the counter; it must be paid into the payee's (M. Sumarch's) bank account; the collecting bank must make sure it is credited only to the named payee; anyone to whom it is transferred gets no better title than the transferor; it protects against theft and fraud; payment can be traced.
(c) Any three: safer than carrying cash; convenient for large or distant payments; serves as evidence/record of payment; payment can be stopped if lost; saves time counting cash.
The bank on which a cheque is drawn is the drawee.