Q.Classify each of the following items as something to be ADDED to, or SUBTRACTED from, the Cash Book balance to arrive at the Pass Book balance:

Add whatever the bank hasn't yet caught up to reducing (issued cheques) or has already added (interest); subtract whatever the bank hasn't yet caught up to increasing (deposited cheques) or has already reduced (a dishonoured cheque reversed by the bank).

1. Cheques issued but not presented — the firm has already reduced its Cash Book balance; the bank has not, so the bank's figure is relatively higher → ADD ₹1,000.
2. Cheques deposited but not collected — the firm has already increased its Cash Book balance; the bank has not, so the bank's figure is relatively lower → SUBTRACT ₹700.
3. Interest credited by the bank, not yet in Cash Book — the bank has already increased its own figure; the firm hasn't → the bank's figure is relatively higher → ADD ₹120. …

Item (d) is the one most often gotten wrong — students frequently forget that a dishonoured cheque means the bank REVERSES an amount it had earlier added, so relative to the firm's (unaware, still-showing-it-as …