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What is Transfer Pricing?

When goods or services are transferred within an organization there needs to be a way of tracking this for accounting purposes. Transfer pricing is a method by which resources can be transferred between different divisions or subdivisions of an organization. This transfer price can also apply to any subsidiaries of the business. The purpose of doing this is to optimize the performance of the organization as a whole and to determine how each division of the company is performing. It makes it possible to calculate each division’s profits and losses separately.

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