Question

A check indorsed "for deposit only":

a. prevents further negotiation of the instrument.
b. requires the amount of the instrument to be credited to the indorser's account before further negotiation occurs.
c. requires the amount of the instrument to be credited to the indorser's account and prevents further negotiation.
d. requires the amount of the instrument to be further indorsed by the payee in person before being credited to the indorser's account.

Answer 1

A check indorsed 'for deposit only' prevents further negotiation of the instrument and can only be deposited into the indorser's account.

a. prevents further negotiation of the instrument.

Step-by-step explanation:

When a check is indorsed 'for deposit only,' it prevents further negotiation of the instrument. This means that the check cannot be cashed or transferred to someone else. It can only be deposited into the indorser's account. The purpose of this type of endorsement is to ensure that the funds are credited to the indorser's account and cannot be misused by anyone else.

When a check is indorsed "for deposit only," it means that the check has a restrictive endorsement. The correct answer to the student's question about the effect of a "for deposit only" endorsement is:

a. prevents further negotiation of the instrument.

This type of endorsement restricts the ability to transfer the check's ownership to another party. Essentially, it limits the use of the check so that it can only be deposited into the account of the person whose name is on the check.