Endorsement definition
/What is an Endorsement in Accounting?
An endorsement is the signature of a payee on a check. This signature is written before the check is transferred to the payee’s bank. For example, a “for deposit only” endorsement ensures that the payee’s bank must deposit the funds into the payee’s account. If the endorsement is a blank endorsement (such as when it is made payable to Cash), the check becomes a negotiable instrument and can then be used by any other party. There are several types of endorsements that may be applied to a check, as noted next.
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Blank Endorsement
A blank endorsement is a simple signature, and does not specify the endorsee. It is the standard endorsement on the back of a check that is then cashed. When a blank endorsement is applied to order paper, it becomes bearer paper. For example, Seth Jones receives a check made out to him and writes his signature on the back of the check. He then loses the check, which George finds. George is now in possession of bearer paper, which only requires delivery for its negotiation.
Deposit Endorsement
A deposit endorsement is a statement “for deposit only,” making the endorsee the collection agent. The intent is to have the endorser deposit the instrument with that party’s bank.
Special Endorsement
A special endorsement is the signature of the endorser, as well as the name of the person to whom the instrument is to be paid (such as “Pay David Andrews”). A special endorsement creates order paper, which requires endorsement and delivery for its negotiation.