Ace AAT Level 2 Practice Test 2025 – Unlock Your Accounting Potential!

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What does 'A/C Payee' indicate on a cheque?

The cheque should only be deposited into the payee's account

When a cheque is marked 'A/C Payee', it indicates that the cheque should only be deposited into the bank account of the individual or entity specified as the payee. This restriction is in place to enhance security and minimize the risk of unauthorized cashing or transferring of the cheque. In essence, it ensures that only the named payee can benefit from the funds, safeguarding against potential misuse of the cheque by other parties.

This feature is particularly important in business transactions where ensuring that funds reach the intended recipient is critical. An 'A/C Payee' designation does not render the cheque void or classify it as a bank draft, nor does it allow for easy transfer to another party. Instead, its primary function is to direct the funds explicitly to the specified account, adding a level of protection and accountability.

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The cheque is void

The cheque is a bank draft

The cheque can be transferred to another party

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