Future Business Leaders of America (FBLA) Accounting Practice Test

What distinguishes a special endorsement?

1. An endorsement that allows for multiple transfers

2. An endorsement indicating a new owner of a check

3. An endorsement that restricts transfer of a check's ownership

4. An endorsement consisting of just a signature

The correct answer is: An endorsement indicating a new owner of a check

A special endorsement specifically indicates a new owner of a check and allows for the transfer of the check to another party. When an individual signs a check over to someone else using a special endorsement, they typically write "Pay to the order of [new payee's name]" followed by their signature. This act effectively designates a new recipient who can then cash or deposit the check. The special endorsement is distinct from other types of endorsements, such as the blank or restrictive endorsements. A blank endorsement merely involves a signature and does not specify a new owner, while a restrictive endorsement limits how the check can be processed, typically requiring that the check be deposited into a specific account. Therefore, the essence of a special endorsement lies in its function of facilitating the transfer of ownership from the original payee to a new person.