[Q.5] What is a restrictive endorsement?

A restrictive endorsement or restricted endorsement places a limitation on the use of a check or other negotiable financial instrument. The most common restrictive endorsement is the phrase For Deposit Only written along with the payee’s signature on the back of a check. Other wording for a similar restrictive endorsement might be Pay to the Order of Sample Bank for deposit to account #xxxxfollowed by the payee’s signature. Many companies endorse checks by using a rubber stamp containing this restriction.

Using a restrictive endorsement is one of many actions that a company can take in order to improve the internal control of its assets.

Posted in: accounting,Q.1-10