UK Accounting Glossary
A cheque that has been sent to the payee’s bank and then through the clearing process only to be returned to the payee because the value cannot be transferred.
If the reason is lack of funds the bank will mark the cheque “refer to drawer”.
A cheque from which funds are not transferred because there are insufficient funds in the payer’s account.
For example, suppose Paul writes a check to Peter for £500, but there is only £400 in Paul’s checking account. When Peter deposits the check, his bank will refuse to credit the £500 to his account, because Paul’s bank will advise that Paul doesn’t have enough money to honour the cheque.
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This glossary post was last updated: 4th May 2019.