Cheque in hand is a financial instrument that represents a promise of payment made by the drawer to the payee. It is a negotiable instrument and is widely used for making payments. In accounting, cheques are classified based on their nature, which can be real, personal, or nominal.

Real Nature of Cheque

A cheque is said to have a real nature when it represents an actual asset that the entity possesses. In this case, the cheque in hand is considered as a real asset because it represents a claim on the funds held in the bank account. The real nature of the cheque is significant because it affects the financial position of the entity and is reflected in the balance sheet.

Personal Nature of Cheque

A cheque is said to have a personal nature when it represents a transaction between two individuals. In this case, the cheque in hand represents a transaction between the drawer and the payee, and it has a personal nature. The personal nature of the cheque means that it cannot be transferred to a third party, and the payee is the only person who can claim the funds.

Nominal Nature of Cheque

A cheque is said to have a nominal nature when it represents an expense or income in the financial statements. In this case, the cheque in hand represents an expense that has been incurred but not yet recorded in the books of accounts. The nominal nature of the cheque means that it does not affect the financial position of the entity and is reflected in the income statement.

Conclusion

In conclusion, the nature of the cheque in hand is determined by the purpose it serves. If it represents an actual asset, it has a real nature, while if it represents a transaction, it has a personal nature. If it represents an expense or income, it has a nominal nature. Understanding the nature of the cheque is crucial in accounting as it affects the financial position of the entity and is reflected in the financial statements.