SEBI Grade A 2022- Commerce & Accountancy Question | Set-4

Correct Answer:  C. Communication of information

Explanation: Accounting as a process of information involves identification, measurement, recording, and communication. Communication is the last step in the process. Identification : It means determining what transactions to record, i.e., to identity events which are to be recorded. It involves observing activities and selecting those events that are of considered financial character and relate to the organisation.

Correct Answer:  A. Understandability

Explanation: Qualitative characteristics are the attributes of accounting information that tend to enhance its understandability and usefulness. In order to assess whether accounting information is a useful decision, it must possess the characteristics of reliability, relevance, understandability, and comparability. Understandability means decision-makers must interpret accounting information in the same sense as it is prepared and conveyed to them. A message is said to be effectively communicated when it is interpreted by the receiver of the message in the same sense in which the sender has sent. Accountants should present comparable information in the most intelligible manner without sacrificing relevance and reliability.

Correct Answer: A. Comparability

Explanation: To be comparable, accounting reports must belong to a common period and use common unit of measurement and format of reporting.

Correct Answer: C. Paid sons fees from her personal bank account Rs.20,000

Explanation: Option c is correct answer as personal bank account is used (for personal reasons) in this particular transactions.

Correct Answer: D. Cost-effective

Explanation: Cost-effectiveness is not a characteristic of useful information, though it is desired.

Correct Answer: D. All of the above

Correct Answer: D. Legal environment

Correct Answer:  B. Information is free from error or bias.

Explanation: Reliability means the users must be able to depend on the information. The reliability of accounting information is determined by the degree of correspondence between what the information conveys about the transactions or events that have occurred, measured and displayed. A reliable information should be free from error and bias and faithfully represents what it is meant to represent. To ensure reliability, the information disclosed must be credible, verifiable by independent parties use the same method of measuring, and be neutral and faithful.

Correct Answer:  B. transforming data into useful information

Explanation: The purpose of an accounting information system (AIS) is to collect, store, and process financial and accounting data and produce informational reports that managers or other interested parties can use to make business decisions.

Correct Answer: B. Information is output, and data is input.

Explanation: Data is raw, unorganized facts that need to be processed. Data can be something simple and seemingly random and useless until it is organized. When data is processed, organized, structured or presented in a given context so as to make it useful, it is called information. From the AIS perspective, data can be seen as input and information as output.