For example, if someone issues the cheque on January 15th, 2021, it will be valid until March 14th, 2021. On 31st May 2021, the supplier accepted the cheques and agreed to deposit them on the dates mentioned. On 15th June 2021, the supplier increased the cash by $2,500 by depositing the first post-dated cheque while reducing the accounts receivable by $2,500. On 15th July 2021, the supplier deposited the second post-dated cheque, repeating a similar transaction. So, there shouldn’t be any journal entries to record in the drawer’s books, i.e., there should be no reduction in cash until the specified date. Also, the recipient shouldn’t make any entry in their books, i.e., there shouldn’t be any increase in money until the selected date.
- Thus, the date on the check effectively postpones the underlying accounting transaction.
- The encashment of a post-dated cheque before the stated date varies from country to country.
- This will not cost you in terms of additional charges that a bank may charge you but a loss of credibility and relationship that has been built so far.
For example, someone writes a check that is dated March 31, even though the current date is March 15. The company receiving such a check should not report the check as cash until the date of the check. (2) A cheque is not invalid by reason only that- (a) it is not dated; (b) it is antedated or post-dated; or (c) the date it bears is a Sunday.
Virtually every adult today would have come across this instrument while either paying for rent in advance or while finalizing a business deal or home loan. Those who are into a business most certainly have come across this important financial instrument in the business world. If that’s the case, you’ll need to contact your bank to specifically inform them not to cash the check until the date appearing on the check. Keep in mind that some banks have a policy where they can honor checks that are made out for a future date. If the writer of the check does not have enough money to cover the check, the recipient will effectively not get paid. For instance, your July 1st post dated check will only be cashable as of July st.
Post Dated Check Example
In addition, each bank has a unique policy for monitoring and prohibiting premature payment. However, please ensure that the cheque is made payable to the correct party and that the recipient’s name is written on it, i.e., the financial institution’s name. Give a check just to the financial institution from whom you took a loan, and make sure to make it payable to that institution.
One can encash such a cheque, on or after 19th April 2019 and not before it. For this definition, a post-dated check is a check that has a future date put on it. A post-dated check is a check that is drawn on a date after the day the check was written, to put it simply. Before we understand the definition of post-dated cheque and why it is issued, let’s understand little more about the cheque. Yes, if the lender agrees to it, you may use post-dated cheques to secure short-term loans as a means of security.
At the beginning of every month, you must make sure you have enough money in your account for the bank to honor your check. Your landlord asks you to pay your rent on the 1st day of every month. Post-dating checks are effective ways to make regular payments to someone at fixed intervals.
Legal implications of dishonouring a post dated cheque
From the perspective of the payer, the best way to ensure that funds are not released early is to notify the bank not to release funds against this check any earlier than the date stated on the check. We believe everyone should be able to make financial decisions with confidence. When you have a postdated check, find out if the check was intentionally postdated and figure out a solution. Post dated cheques are written primarily in one of the situations listed below. Stale Cheque refers to a cheque which is expired because it is held by the payee for too long. Here, it is important to note that cheque will be presented to the bank either on the date written on cheque and after the date.
Bank Rules On Post Dated Checks
Financial institutions now send digital pictures of checks to other financial institutions, so they can be cashed more quickly. You’re writing a check to your landlord, but you don’t have enough money in your account. So you date the check a few days in advance — also called postdating it — hoping your paycheck will clear by then. However, the payer utilizes it when they must hand over many post-dated cheques to cover future payments.
The 3 months are not counted in the number of days, but the date of issuance. For example, if the cheque was issued or is payable on 01 Jan 2023, the cheque will be valid till 31st of Mar 2023, irrespective of the number of days in between. Typically, a post dated check is issued so the issuer can delay the payment to the beneficiary.
Post-dated cheque validity
Post-dated cheques are normal cheques with a future date written on them. The cheques cannot be honoured by the banks before the date mentioned on the cheque. A cheque is defined as an instruction to the bank asking to pay a stated sum from the owner’s account to the cheque presenter or drawer. Cheques are written or printed in a specific format and in a form that is not easily replicable. The last alternative to providing a post dated check is the good old hard cash payment. In many jurisdictions, a person intentionally writing a worthless post dated check with the intent to defraud the beneficiary can be criminally charged and convicted.
The only difference between a regular cheque and a post dated cheque is that the present date is replaced with a future date. Suppose Jim has to pay a supplier INR 2,000 on 22d May for transactions he made 40 days ago. Since Jim lacks the funds to pay the supplier, he agrees to send the supplier two INR 1,000 cheques, one dated 20th June and the other dated 20th July. As a bill of exchange, a cheque must be drawn out to a specific banker and intended to be paid on demand. Financial stability is commonly regarded as the foundation of any organisation. When a business is involved in sales or purchases, it is necessary to have a practical accounting system.
An Indian post dated cheque is valid for three months from the day it was issued. Similarly, the rules governing the issuance and validity of post dated cheques vary from country to country. As a result, many businesses and companies may accept post dated checks but will not deliver the goods or render services for several days to ensure that the check is cashed and cleared by the bank.
Post Dated Cheque
People can postdate several types of payment methods, including checks and electronic payments. Payments may be postdated in a number of circumstances, including if someone sets up a payment arrangement with a creditor or when there are regular monthly payments set to come out of an account. Postdated payments cannot be withdrawn from an account until the date specified. Realistically, the recipient of a post dated check may never notice that the check has been post dated, and so will record and deposit it at once. The bank is also unlikely to notice the date on the check, and in any case may have a policy of honoring all checks at once, irrespective of the check date.
Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. In the absence of a legitimate response from the responder, the interested party has 45 days to file a case. As you can see in the image of a sample cheque above, several blanks need to be filled in before you send the cheque to be honoured by the bank. However, there are instances that you can get in trouble for writing a worthless check. Your August 1st posted check will be cashable as of August 1st, and so on.
The difference between a checking and savings account can seem confusing. Huntington is here to help you understand the differences between a checking and a savings account and how both could help you manage your finances. If you want a basic checking account with no monthly maintenance fee, or an interest-earning checking account, we’ve got the options that are right for you. what is noi and why is it important The drawer typically uses a post-dated cheque to postpone the payment to the recipient. In contrast, the recipient accepts such delayed payment because it represents a fixed date for the deposit, which eventually translates into revenue. However, it is illegal to write a check when you know you don’t have the funds to cover it, even if you hope to have the funds later.