Answer:

When the starting point of the analysis is the overdraft as per the Cash Book, the effect of a cheque of 500 deposited into the bank but not recorded in the Cash Book can be determined by following these steps:

Step 1: Understand the Concept
To understand the effect of the unrecorded cheque deposit, we need to consider the basic accounting equation: Assets = Liabilities + Equity. In this case, the overdraft represents a liability, and the cheque deposit represents an increase in assets.

Step 2: Analyze the Impact
The unrecorded cheque deposit of 500 will have the following impact on the accounting equation:

Assets: The cheque deposit of 500 will increase the assets by 500.

Liabilities: The unrecorded cheque deposit does not have any impact on the liabilities.

Equity: The unrecorded cheque deposit does not have any impact on the equity.

Step 3: Determine the Correct Treatment
Based on the analysis, the unrecorded cheque deposit of 500 should be added to the Cash Book, as it increases the assets. Therefore, the correct treatment is to deduct the 500 from the overdraft, resulting in a decrease in the overdraft balance.

Step 4: Answer the Question
Based on the correct treatment, the answer to the question is (b) Deducted by 500.

Explanation:
The unrecorded cheque deposit of 500 increases the assets by 500, as it represents a deposit into the bank. Since the starting point of the analysis is the overdraft as per the Cash Book, the correct treatment is to deduct the 500 from the overdraft balance. This deduction helps to correct the error and reflect the true financial position in the Cash Book. Therefore, the unrecorded cheque deposit of 500 should be deducted by 500, and the overdraft balance will decrease accordingly.

In summary, the unrecorded cheque deposit of 500 should be deducted by 500 from the overdraft balance when the starting point of the analysis is the overdraft as per the Cash Book.