Explanation:

Bank reconciliation statement is a statement prepared to reconcile the balance as per the cash book and balance as per the bank statement. It is prepared to find out the reasons for the difference in balances and to rectify them.

In this case, the starting point is the overdraft as per the cash book. It means that the balance as per the cash book is overdrawn or negative. Now, let's see what happens when a cheque of Rs. 5,500 is deposited in the bank and duly credited by the bank but not recorded in the cash book.

When a cheque is deposited in the bank, it will not immediately reflect in the cash book. It will be recorded in the cash book only when it is cleared by the bank. Until then, it will be considered as an outstanding item.

In this case, the cheque is credited by the bank, which means it is cleared by the bank. But it is not recorded in the cash book. So, it is an outstanding item.

When preparing the bank reconciliation statement, we need to consider this outstanding item and adjust the balance as per the cash book accordingly.

Since the cheque is not recorded in the cash book, the balance as per the cash book will be lower than the balance as per the bank statement. So, we need to add this amount to the balance as per the cash book to reconcile it with the balance as per the bank statement.

But the question asks for the effect on the bank reconciliation statement. It means we need to find out the effect on the balance as per the cash book.

The cheque is for Rs. 5,500, so when we add it to the balance as per the cash book, the balance will increase by Rs. 5,500.

But the balance as per the cash book is overdrawn or negative. So, when we add Rs. 5,500 to it, the balance will still be negative. It means the balance as per the cash book will be less negative than before, but it will still be negative.

Therefore, the correct option is B) Rs. 5,500 will be deducted. It means we need to deduct this amount from the overdraft balance as per the cash book to reconcile it with the balance as per the bank statement.

In summary,

- The cheque of Rs. 5,500 is an outstanding item.
- We need to add it to the balance as per the cash book to reconcile it with the balance as per the bank statement.
- But the balance as per the cash book is overdrawn or negative.
- So, when we add Rs. 5,500 to it, the balance will still be negative.
- Therefore, we need to deduct Rs. 5,500 from the overdraft balance as per the cash book to reconcile it with the balance as per the bank statement.
- The correct option is B) Rs. 5,500 will be deducted.

The balance of cashbook is overdraft i.e. negative value.
Since the balance as per cash book is starting point so we have to match it with pass book. In pass book, 5500 is added so we have to add it in the cash book as well. However the value of cash book is negative hence it will be subtracted. (Opposite signs)