Difference Between Check and Promissory Note
Using the cash to make and receive payments for goods and services is not only unrealistic but also dangerous. Although it is easier to make payments by cash and credit cards in daily life, negotiable instruments are preferred by people in the place of cash in business. In companies there are several payments made in one day and it is not possible to take use cash all the time. In this article we will talk about checks and promissory notes which are two of these negotiable instruments. In spite of serving similar goals, there are many differences between a check and a promissory note that will be clear after reading this article.
We all know about checks as they have become very common place and a safe mode of money transfer. We receive the payment by employers through checks that we deposit in our current account and the money is added to our account. In business, we have to pay providers when the due date of their invoice arrives. They can present the check in the bank that will credit their account with the amount specified by us and charge us by the same amount. Cheques are a very convenient mode of payment that erases the need of cash to conduct any business. They are documents issued to a bank that entitle the person whose name they bear to claim the amount mentioned in them.
To understand the promissory note, let us take an example. If you take a loan of $ 1,000 of your friend Matt, you can ensure the safety of his money by publishing a document saying you will pay money to Mat or holder of the document after a date which is mentioned on the document. We call this document a promissory note , and it is duly signed by you and it has a stamp attached and it is called so because it contains a promise to Matt that you’ll give back the money after a specified period.