What is a Blank Cheque?
A blank cheque is a cheque that is signed by the account holder (drawer) but does not have a specified amount. This effectively means that the amount to be drawn is left open and can be filled in by the bearer (the person receiving the cheque). It’s essential that trust exists between the drawer and the bearer, as the bearer has the discretion to write any amount not exceeding the drawer’s account balance.
Key Features
- Signature Required: A blank cheque must be signed by the drawer.
- Unspecified Amount: The amount to be withdrawn is left blank for the bearer to specify.
- Negotiable Instrument: It remains a negotiable instrument and can be presented to the bank for payment.
Examples of Use
- Corporate Environment: A company may issue a blank cheque to a trusted employee for emergency expenditures.
- Personal Use: It can be given to family members or close friends when precise expenditure cannot be anticipated.
- Events and Functions: Event organizers might use blank cheques to cover unexpected costs that may arise during the event.
Frequently Asked Questions
Q: Is it safe to issue a blank cheque?
A: Issuing a blank cheque comes with risks, as the bearer can fill in any amount they choose. It should only be used when there is a high level of trust between the drawer and the bearer.
Q: How can I protect myself when issuing a blank cheque?
A: To mitigate risks, you can provide a limit or instructions alongside the blank cheque, and ensure it is issued only to trusted individuals.
Q: Can a blank cheque be canceled?
A: Yes, a blank cheque can be canceled by notifying the bank before it is cashed.
Q: What happens if a blank cheque is lost or stolen?
A: If a blank cheque is lost or stolen, you should immediately notify your bank to stop payment on the cheque to prevent unauthorized withdrawals.
Q: Are blank cheques legal?
A: While blank cheques are legal, their use is not common due to the inherent risks. Legal situations may vary by country.
Related Terms
- Cheque: A written order directing a bank to pay a specified sum from the drawer’s account.
- Bearer Cheque: A cheque payable to the bearer, meaning anyone holding the cheque.
- Crossed Cheque: A cheque that can only be deposited directly into a bank account and not cashed.
- Post-Dated Cheque: A cheque with a future date, not be cashed until the date specified.
Online References
Suggested Books for Further Studies
- “Accounting All-in-One For Dummies” by Kenneth W. Boyd
- “Frank Wood’s Business Accounting Volume 1” by Frank Wood and Alan Sangster
- “Financial Accounting” by Walter T. Harrison Jr., Charles T. Horngren, C. William (Bill) Thomas
Accounting Basics: “Blank Cheque” Fundamentals Quiz
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