AI-generated practice question — model-generated for extra practice, not a previous-year CBSE board question.
The leather supplier deposits the cheque in his own bank. His bank sends the cheque to Salim's (the shoe manufacturer's) bank for clearance. Salim's bank checks whether sufficient funds exist in his account. If yes, the amount is deducted from Salim's account and transferred to the leather supplier's bank, which then credits the amount to the supplier's account. The supplier can then withdraw the money as cash or use it for further transactions.
Source: Money and Credit, Chapter 3
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The question tests knowledge of how cheques work as a banking instrument — a key concept in "Modern Forms of Money." Examiners expect students to mention: (1) depositing the cheque, (2) the role of both banks, (3) verification/clearance, and (4) final credit to the supplier's account. Four logical steps = 3 marks. Do not write vague statements like "the bank pays him" — show the step-by-step transfer process between two banks.