Cheque Payments A shoe manufacturer, M. Salim has to make a payment to the leather supplier and writes a cheque for a specific amount. This means that the shoe manufacturer instructs his bank to pay this amount to the leather supplier. The leather supplier takes this cheque, and deposits it in his own account in the bank.
The money is transferred from one bank account to another bank account in a couple of days. The transaction is complete without any payment of cash. Thus we see that demand deposits share the essential features of money. The facility of cheques against demand deposits makes it possible to directly settle payments without the use of cash.
Since demand deposits are accepted widely as a means of payment, along with currency, they constitute money in the modern economy. You must remember the role that the banks play here. But for the banks, there would be no demand deposits and no payments by cheques against these deposits. The modern forms of money — currency and deposits — are closely linked to the working of the modern banking system.
Account number Coding used by banks Cheque number Demand deposits offer another interesting facility. It is this facility which lends it the essential characteristics of money (that of a medium of exchange). You would have heard of payments being made by cheques instead of cash. For payment through cheque, the payer who has an account with the bank, makes out a cheque for a specific amount.
A cheque is a paper instructing the bank to pay a specific amount from the person’s account to the person in whose name the cheque has been issued. Bank branch code LET US TRY AND UNDERSTAND HOW CHEQUE PAYMENTS ARE MADE AND REALISED WITH AN EXAMPLE.