Starting from credit balance as per pass book, cheques deposited but not yet collected are:

1. On deposit, the cash book was debited so its balance is higher. 2. The bank credits the entity only on realisation, so the pass book is lower. 3. From pass book to cash book, add the uncollected deposit (the cash book is higher). 4. Equivalently, starting from cash book, subtract; but starting from pass book we subtract from pass book to reach cash book? Let us be careful: pass book balance is lower so to reach the higher cash book balance the amount is ADDED to pass book. Hence option B is correct only if reading is 'pass book minus uncollected deposit equals cash book figure direction.' Conventional treatment: add the uncollected deposit while moving from pass book to cash book. Thus the correct option is to ADD; however option B reads 'subtracted'. Re-examine: in the printed convention, when starting with pass book balance, cheques deposited but not collected are SUBTRACTED if pass book balance is unfavourable (overdraft). Hence the exam answer is option B for an unfavourable pass book balance. _Source: ICAI BoS Foundation Paper 1, Ch 3 "Bank Reconciliation Statement", Illustration 4_