Dictionary / Indorsement
What does Indorsement mean in accounting?
Quick definition
GeneralThe payee's name signed on the back of a negotiable instrument. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.
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Examples
Stamping a customer check for deposit
You run a bakery. On June 17, a veterinary clinic pays invoice 8841 with a $1,875 check payable to your bakery. Before you take it to the bank, you stamp the back For deposit only and sign the shop name. That payee name on the back is the indorsement. In QuickBooks Online, Receive payment so accounts receivable drops $1,875 and undeposited funds (or checking) rises; the bank feed later matches the deposit.
A check made out to someone else
On November 4, a walk-in offers a $640 check from a homeowners association made payable to another person, not to your bakery. That person has not signed the back. That missing payee name is a missing indorsement, so you should not take the check as payment. Ask for a check payable to your bakery, a card, or ACH. If you deposit it anyway, the bank can refuse it, and you still have an open receivable with paper you cannot cash.
Why it matters
Indorsement is the older spelling of endorsement: the payee's name signed on the back of a check or promissory note so the paper can be deposited or transferred. You see it whenever you take a paper check; ACH and card deposits skip it. Honor is the bank accepting the instrument for payment, not that back-of-check signature. Mix this up with an insurance endorsement (a change to a policy), or deposit a check without the named payee's signature on the back, and the bank can refuse the paper while accounts receivable stays open.
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What is Indorsement in bookkeeping?
The payee's name signed on the back of a negotiable instrument.
When should I use Indorsement?
Use Indorsement when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.
What is a common mistake with Indorsement?
Indorsement is used for indorsement entries, while Imprest Cash Fund covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.