In the previous lesson, we explained two types of commercial papers that are circulated between individuals, namely the bill of exchange and the promissory note. There is another type of commercial paper that is dealt with frequently between individuals and merchants, which are checks.
checks
A check is a written instrument that includes an order issued by the drawer (the owner of the bank account) and addressed to the bank, to pay an amount of money to another person called the beneficiary.
A check is a written instrument that includes an order issued by the drawer (the owner of the bank account) and addressed to the bank, to pay an amount of money to another person called the beneficiary.
Checks are either checks issued by the establishment to a third party in exchange for its purchases or payment for its account, or checks received from third parties to the establishment in return for its sales to them or payment for their account.
Post-dated Checks:
They are the checks issued by the establishment to others in return for its purchases or to pay for its account, and they are due for payment at a later date.
In this case, an intermediary account is opened in the name of a post-dated check account, which is credited with the value of the check
They are the checks issued by the establishment to others in return for its purchases or to pay for its account, and they are due for payment at a later date.
In this case, an intermediary account is opened in the name of a post-dated check account, which is credited with the value of the check
When a notice from the bank arrives stating that the value of the check has been paid to the beneficiary on the due date and its value has been deducted from the current account of the establishment, the following entry is recorded:
Rejected (Bounced) Checks Issued
The bank may refuse to pay the value of the check to the beneficiary due to insufficient balance in the current account with the facility, or due to a different signature, or for any reason.
The bank may refuse to pay the value of the check to the beneficiary due to insufficient balance in the current account with the facility, or due to a different signature, or for any reason.
It was, then the beneficiary returns the check to the facility, the facility records a reverse entry as follows:
Accounting treatment of incoming checks
Incoming checks are the checks that the establishment obtains from third parties in return for its sales to them or for payment for their account, so that the establishment will then cash the check from
Incoming checks are the checks that the establishment obtains from third parties in return for its sales to them or for payment for their account, so that the establishment will then cash the check from
The bank and depositing its value either in the fund or in its current account with the bank as follows:
Debtor creditor statement
xxx
From h/ the bank or the fund
xxx to h/sales
Selling goods according to a check drawn on the bank
Checks under collection
These are the checks that the establishment obtains from third parties in return for its sales to them or to pay for their account, and they are due for receivable at a later date, and then the establishment opens an account
An intermediary in the name of checks for collection is a debtor as follows:
Debtor creditor statement
xxx
From h / checks for collection
xxx to h/sales
Sale of goods according to checks due on the date of...
At the maturity date and collection of the value of the check either in cash or by adding it to the facility’s current account with the bank, the following entry is written:
Debtor creditor statement
xxx
From h/ the bank or the fund
xxx to h / checks for collection
Collecting the value of the check at the due date
Transfer of incoming check (endorsement)
Checks are distinguished in that they can be transferred to another beneficiary, so that their ownership is transferred from one beneficiary to another beneficiary, so the entry when endorsing the incoming check is as follows:
Debtor creditor statement
xxx
From h/pd
xxx to h/the bank or checks for collection
Purchasing goods according to an incoming check that has been endorsed
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