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Principle of Banking

Chapter 4

QuestionAnswer
Altered check A check on which a material change, such as the dollar amount, has been made.
Cash (1) Money in the form of bills or coins; (2) money on hand or in the bank.
Cash letter An interbank electronic or paper transmittal form, resembling a deposit slip, used to accompany cash items sent from one bank to another.
Check A draft on an account in a bank that the owner of the account signs to direct the bank to pay a certain amount to the payee.
Depositary Bank The bank in which a check is first deposited. The bank also may be the drawee if the check is drawn on, payable at, or payable through the bank.
Dual custody A security technique that uses two or more individual parties operating together to protect sensitive functions, information, or assets.
Endorsement A signature (other than the signature of the maker, drawer, or acceptor) typically made on the back of the instrument, such as a check, for negotiating the instrument, restricting payment, or transferring liability of the instrument to another party.
Hold A restriction on the payment of all or any part of the balance in an account.
Holder A person who is in possession of a negotiable instrument and who is entitled to receive payment of the instrument.
medium of exchange Currency or other financial instrument used to facilitate transactions between parties.
Negotiable instrument A check involving three parties: the person writing the check (the drawer), the person to whom the check is written (the payee), and the bank that holds the checking account (the drawee).
Negotiable instrument An unconditional written order or promise to pay a certain sum of money. The document must be easily transferable from one party to another by endorsement and delivery or delivery alone.
Nonsufficient funds An expression indicating that a check or item drawn against an account exceeds the amount of funds available in the account. Commonly called an “NSF” or overdraft.
Notary public A public officer who acknowledges or otherwise attests or certifies documents as authentic, usually under an official seal.
On-us Check A check deposited or otherwise negotiated at the bank on which it is drawn.
Positive pay A bank service that pays a business’s checks only if they match the check data on an electronic list of issued checks that the business sends to the bank.
Stop Payment An order by a depositor to the bank (the drawee) to not pay a previously issued check or item.
Substitute check A paper reproduction of the original check drawn from an electronic file that contains an image of the front and back.
Truncation The process of removing the physical paper check from the processing flow.
Uniform Commercial Code A set of laws adopted by states to govern commercial and financial transactions between parties. Many states add their own amendments to the basic code.
Wrongful dishonor Failure of the drawee to pay a properly payable check.
Created by: Sharon.Spence