A check is an authorization to draw funds from a bank account. In order to do this, a check must state the name of the payee, the amount to be paid, and the date. A check is usually negotiable, so that the payee can assign it to another person by endorsing it. The person to whom the check is assigned becomes the new payee. The use of checks allows two parties to a transaction to engage in a monetary transaction without physically exchanging any currency. There are several variations on the check concept, including the following:

  • A cashier’s check, where a bank is responsible for the payment of funds.
  • A certified check, where a bank guarantees that the drawer’s account has sufficient funds in it to keep the check from bouncing.
  • A payroll check, where the payment is intended to compensate employees for their work.

The use of checks has declined as electronic forms of payment, such as ACH payments and wire transfers, have increased.

Related Courses

Corporate Cash Management 
Payables Management