Question

explain how a financial institution (bank) will use standards.?

Answer 1

A financial institution is the one that regulates economy and transfer funds from surplus sector to deficit sector. Bank is a financial institution and accept deposits while lending money. Bank has to maintain record of every customers and in order to ensure proper and efficient work with minimum errors, it has to followup standards set up by the central bank (RBI). Standards are the benchmarks set up in order to have similarity and effective representation and comparability of statements.

While recording financial transactions, bank has to follow accounting standards. These standards can be used by the bank to compare its financial statements with other. It provides a better control of what is going wrong and appropriate steps are taken to correct it. Bank provide services to analyse and give an expert opinion about the financial statements to customers. So, taking these standards as base, bank can easily compare the financial statements, portfolios and analyse in a better way. Bank can use these standards to compare and provide knowledge regarding area of improvement and also the steps that can be undertaken by the customer to maintain those standards.

So, overall standards are used to find the deviations, comparison and resolving problems and identifying the key area.And bank uses this very expertly and efficiently.