Businesses and individuals open checking accounts to eliminate the need for cash when conducting financial transactions. The business or individual deposits their cash into the checking account and writes out a check whenever they need to access the money. The checking account holder needs to record certain information on the check for it to constitute a legal transaction with the other party.
Every check includes a place for the check writer to record the date. This date represents the date the transaction occurs. Some check writers consider dating the check in the future, or postdating the check. These check writers assume the bank will not honor the check until that date. This assumption is false. Banks can honor the check at any point after the account holder writes out the check. The date place is on the upper right side of the check.
The payee represents the person or company the check is given to. The check writer should write the person or company's legal name on this line, making sure to spell each word correctly. The payee receives the right to exchange the check for cash at a financial institution. When exchanging the check for cash, the payee signs the back of the check with her signature. Some checks are written to multiple payees. In those cases, each payee must sign the back of the check before it can be exchanged for cash. The payee line is located halfway down the check with the words "Pay to the order of" to the left.
Paper checks include two places where the check writer identifies the dollar amount that the check represents. The first place is usually on the right side of the check underneath the date. The check writer writes out the dollar amount using numbers here. The second place is located underneath the payee line. The check writer writes out the dollar amount using words. These two amounts must match.
For a check to become legal money, the check writer must sign the check. At the bottom right side of the check, a blank line exists. This is where the check writer signs his name. By signing his name, he verifies that the information on the check is accurate and that he is transferring the right to exchange the check for cash to the payee.