Q.State, with reasons, whether each of the following items will be ADDED or SUBTRACTED while preparing a Bank Reconciliation Statement starting from a favourable balance as per Cash Book, to arrive at the balance as per Pass Book:

This kind of question tests whether the reasoning behind Add/Less — not just the memorised answer — is properly understood.

1. Add ₹5,000. The firm has already credited (reduced) its Cash Book when the cheque was issued, but since the cheque has not yet been presented, the bank has not yet paid it out — so the Pass Book balance is still higher by this amount.
2. Subtract ₹3,200. The firm has already debited (added to) its Cash Book on depositing the cheque, but the bank has not yet actually collected/realised it — so the Pass Book balance does not yet include this amount.
3. Subtract ₹80. The bank has already deducted these charges in the Pass Book, but the firm has not yet recorded them in its Cash Book — so the Cash Book balance is overstated by this amount relative to the Pass Book.
4. Add ₹250. The bank has already credited this interest in the Pass Book, but the firm has not yet recorded it in its Cash Book — so the Cash Book balance is understated by this amount relative to the Pass Book. …

For every item, ask two questions: 'Has the BANK already acted on this?' and 'Has the FIRM already acted on this?' If only the firm has acted (cheque issued, cheque deposited), the Cash Book is ahead of the Pass Book on that item; if only the bank has acted (charges, interest, dishonour), the Pass Book …

Students often try to memorise 'cheques issued = add, cheques deposited = subtract' as a fixed rule without understanding WHY, and then apply it wrongly the moment the starting point changes (Pass Book instead o …