Endorsement of Cheque and Dishonour of Cheque

 

(A) What is endorsement of a cheque?

Endorsement of cheque means changing the ownership of cheque or bill. 

To endorse cheque, payee puts signature on back side of the cheque.

He/she allows permission to pay amount of cheque to endorsed person.

Suppose Manju Chaudhary received a cheque from Manoj Sharma $/₹/Rs 8,000 endorsed to Rekha Thapa with proper notice is called endorsement.

 

There are three types of cheque; bearer, order and crossed cheque.

Bearer cheque does not need to endorse.

Crossed cheque cannot endorse.

Only order cheque is endorsed.

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country

Journal Entry

In the book on Manju Chaudhary

Cheque received from Manoj

Cheque endorse to Rekha

Bank account

Dr

8,000

Rekha Thapa

Dr

8,000

To Manoj Sharma

8,000

To Bank account

8,000

(Being- cheque received from Manoj Sharma)

(Being- cheque received from Manoj Sharma

endorsed to Rekha Thapa)

If bank entry eliminated

Rekha Thapa

Dr

8,000

To Manoj Sharma

8,000

(Being- cheque endorsed to Rekha Thapa)

Note: In above journal entry, Manju Chaudhary is payee or endorser and Rekha Thapa is endorsee.

 

Example

Extracted data is given by Manju Chaudhary:

Nov 5, Cheque received from Manoj Sharma of Rs 8,000.

Nov 6, Cheque received from Manoj Sharma endorsed to Rekha Thapa.

Required: Show in cash book

SOLUTION    

Double Column Cash Book (Cash and Bank)

Date	Receipt	LF	Cash	Bank	Date	Payment	LF	Cash	Bank
Nov 5	To Manoj Sharma		–	8,000	Nov 6	By Rekha Thapa		–	8,000
						(endorsed)

#######

Click on link for YouTube videos topic wise :
Accounting Equation	http://tiny.cc/c89jkz
Basic Journal Entries in Nepali	http://tiny.cc/uaakkz
Basic Journal Entries	http://tiny.cc/8aakkz
Journal Entry and Ledger	http://tiny.cc/caakkz
Ledger Account	http://tiny.cc/haakkz
Subsidiary Book	http://tiny.cc/399jkz
Cash Book	http://tiny.cc/889jkz
Trial Balance and Adjusted Trial Balance	http://tiny.cc/c59jkz
Bank Reconciliation Statement (BRS)	http://tiny.cc/q59jkz
Depreciation	http://tiny.cc/ugakkz
Click on link for YouTube videos chapter wise:
Financial Accounting and Analysis (All videos)	http://tiny.cc/jlersz
Accounting Process	http://tiny.cc/mlersz
Accounting for Long Lived Assets	http://tiny.cc/plersz
Analysis of Financial Statement	http://tiny.cc/slersz

#######

(B) Types of endorsement

There are different types of endorses like general, special and restrictive, partial endorsement etc.

Blank or general endorsement

When payee or endorser put simple signature on the back of the cheque, it is known as blank or general endorsement.

It can be endorsed to anybody.

Payee Manju Chaudhary does not write anything on back side of cheque, there is only signature of payee.

Manju Chaudhary

Full or Special endorsement

When payee or endorser write endorsee’s name with his signature on the back of the cheque, it is known as special endorsement.

Payee Manju Chaudhary writes on back side of cheque “Pay to Rekha Thapa”

Manju Chaudhary

Restrictive endorsement

When payee of endorser puts the signature on the back of the cheque referred person, it is known as restrictive endorsement.

It is written on back side of cheque “Pay to Rekha Thapa only”

Manju Chaudhary

Partial endorsement

Suppose value of cheque is Rs 8,000.

Payee puts signature on back side of cheque “Pay to Rekha Thapa Rs 5,000 only”

Manju Chaudhary

This is a partial endorsement and invalid for the purpose of negotiation.

 

 

(C) What is dishonour of a cheque?

Cheque is a written order.

This order is given to bank by an account holder.

When cheque presents for payment but there is not sufficient amount in the bank account, it is called dishonor of a cheque.

There are lots of reasons for dishonour of cheque.

Some major reasons are:

There is not sufficient amount at bank,

Date is not written correctly,

Name of payee is not written,

Amount of words and figure does not match,

Drawer’s signature does not match with computer or signature specification card,

Cheque is overwritten, spoiled, torn and spotted,

Drawer has given order to stop payment etc.

 

Cheque received				Cheque dishonoured
Bank account	Dr			Maya’s account	Dr	Dr
To Maya’s account				To Bank account
(Being- cheque received from Maya)				(Being- cheque received from Maya dishonoured)

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country

Example: 1

Extracted data is given by SB Traders:

Sep 5, Cheque received from Maya Rs 3,700.

Sep 12, Cheque received from Maya dishonoured.

Required: Show in cash book

SOLUTION    

Double Column Cash Book (Cash and Bank)

Date	Receipt	LF	Cash	Bank	Date	Payment	LF	Cash	Bank
Sep 5	To Maya’s account		–	3,700	Sep 12	By Maya’s account		–	3,700
						(dishonoured)

 

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