Magnetic Ink Character Recognition (MICR)

Magnetic Ink Character Recognition (MICR) is a technology utilized to facilitate the processing and clearance of checks and other documents by employing a specific type of font and ferromagnetic ink. This technology enables machines to read and sort these documents quickly and accurately.

Examples§

1. Bank Checks: A common application where the routing number, account number, and check number are printed using MICR to facilitate automated processing.
2. Deposit Slips: Often use MICR to allow banks to process deposits swiftly.
3. Payment Vouchers: These documents may also use MICR to ensure they are processed by automated systems efficiently and accurately.

Frequently Asked Questions§

1. What is ferromagnetic ink? Ferromagnetic ink contains iron oxide, which allows the ink to be magnetized, making it readable by electronic devices specifically designed to recognize MICR characters.

2. How does MICR improve check processing? MICR technology increases the speed and accuracy of check processing by allowing automated systems to read and sort checks based on encoded information in the MICR line.

3. Is MICR only used for checks? No, MICR is also used for deposit slips, payment vouchers, and other documents requiring secure and rapid processing.

4. Why is MICR more secure than other recognition systems? The use of ferromagnetic ink makes MICR documents more resistant to forgery and alteration, enhancing the security of financial transactions.

5. Can MICR characters be read by humans? Yes, MICR characters are human-readable, but they are specifically designed to be easily recognized by machines.

Related Terms§

• Optical Character Recognition (OCR): A similar technology used to convert different types of documents, such as scanned paper documents, PDF files, or images taken by a digital camera, into editable and searchable data.

• Check 21 Act: A United States federal law that allows the recipient of a paper check to create a digital version, improving check processing efficiency.

Online References§

1. Investopedia on MICR
2. How MICR Works in Banking

Suggested Books for Further Studies§

1. “Principles of Information Systems for Management” by N. Zwass.
2. “Fundamentals of Financial Accounting” by Fred Phillips, et al.
3. “Accounting Information Systems” by Marshall B. Romney and Paul J. Steinbart.

Accounting Basics: “Magnetic Ink Character Recognition (MICR)” Fundamentals Quiz§

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