Question

State one difference between cheque and bank draft.

Differentiate between a cheque and a demand draft.

Give any five differences between cheque and bank draft.

Answer 1

Sr. No.	Basis of Distinction	Cheque	Bank Draft
1.	Drawer	A cheque is drawn by a person.	A bank draft is always drawn by a bank.
2.	Bearer	A cheque can be drawn payable to the bearer.	A draft cannot be made payable to the bearer.
3.	Charges	In the case of a cheque, the person who receives the payment has to pay collection charges.	In case of a draft, a commission is paid in advance by the sender of the money.
4.	Dishonour	A cheque is dishonoured if the funds in the drawer's account are insufficient.	The draft amount is taken in advance by the bank. There is no question of a draft being dishonoured.
5.	Stop payment	The payment of a cheque can be stopped by giving a written notice to the concerned bank.	The payment of a bank draft cannot be so easily stopped.

Answer 2

Sr. No.	Basis	Cheque	Bank Draft
1.	Issuer	Written and issued by an account holder (the drawee).	Issued by the bank itself on behalf of the account holder.
2.	Guarantee of Payment	Payment is not guaranteed as it depends on the availability of funds in the account.	Payment is guaranteed by the bank, as the amount is prepaid by the drawer to the bank.
3.	Risk of dishonour	Can be dishonoured due to insufficient funds or other issues.	Cannot be dishonoured as funds are secured in advance.
4.	Encashment	In case of a cheque, the payee does not receive cash immediately on presentation.	Bank drafts can be encashed immediately on presentation.
5.	Suitability	Cheques are commonly used for regular transactions.	Bank drafts are preferred for large, secured payments where reliability is essential.