Hazique

Transfer pricing is a simple concept to understand.

Think of any company engaged in the production of cars. Suppose one of the divisions of this company produces brakes which are used in the cars.This division can sell the brakes to outside customers i.e. it has an external market. At the same time, these brakes can be used in the cars manufactured by its own company. This means brakes producing division will transfer the goods to assembly division. This transfer will not be free, it would include some price. This price is called transfer price.

Therefore, "transfer price is the price one division charges for the product/services tranferred to another division/department of the same organisation".

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haha8103

thank you man

jiesi27

Thanks for that.