Find closest multiple of $23$ to $85$. We see that $3 \times 23 = 69$ is the nearest. Now subtract $69$ from $85$ to get reminder $16$. Add $3$ to quotient.
Find closest multiple of $23$ to $169$. We see that $7 \times 23 = 161$ is the nearest. Now subtract $161$ from $169$ to get reminder $8$. Add $7$ to quotient.
Since $8$ is less than $23$, stop the division. The reminder is $8$. The topmost line $037$ is the quotient. Remove all zeros at the start of the quotient to get the actual quotient $37$.