Question

When is the drawer of the check presumed to know there is insufficient funds in or credit with the drawee bank?

a) At the time of issuance
b) After the check is deposited
c) When the check is presented for payment
d) Upon receiving the checkbook

Answer 1

The drawer is presumed to know of insufficient funds at the time they issue the check. An overdraft occurs when a check is written for an amount that exceeds the drawer's account balance.

Step-by-step explanation:

The drawer of the check is presumed to know there is insufficient funds in or credit with the drawee bank at the time of issuance of the check. This presumption arises because, as the account holder, the drawer has control over their account balances and is responsible for knowing their available funds before writing a check. When a check is used for payment for goods and services, the store or recipient deposits the check into their bank account. The funds are then transferred from the drawer's account to the recipient's account. If there are insufficient funds in the drawer's account to cover the check, this results in a situation known as an overdraft, where the account balance goes below zero.