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Write a note on transfer pricing.

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Transfer price refers to the amount used in accounting for transfer of goods or services from one responsibility centre to another or from one company to another which belongs to the same group.

Transfer pricing is a mechanism for distributing revenue between different divisions which jointly develop, manufacture and market products and services.

Transfer pricing systems are designed to accomplish the following objectives:
  • to provide each division with relevant information required to make optimal decisions for the organisation as a whole;
  • to promote goal congruence – that is, actions by divisional managers to optimise divisional performance should automatically optimise the firm's performance; and
  • to facilitate measuring divisional performances.
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  1. bhavya2 Nov 2018, 17:21:00

    Good explanation It was simple and Straight about Transfer Pricing can easily understand to everyone Thank you for sharing

    ReplyDelete

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