The 'Transfer Price' in cost accounting for internal transfers is: MCQ with Answer and Explanation

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The 'Transfer Price' in cost accounting for internal transfers is:

A. Government regulated price

B. Cost plus fixed profit

C. Market price only

D. Price at which goods/services are transferred between divisions of the same company

Answer: Option D

Solution (By JKSSB Mock Tests)

Transfer price is the value placed on internal transfers between responsibility centres.

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

If goods worth Rs 2,000 returned to a supplier are not recorded at all, this error is called:

A. Compensating Error

B. Error of Principle

C. Error of Commission

D. Error of Omission

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Correct Answer: Option D

Explanation:
A complete failure to record a transaction in the books of original entry is an error of complete omission.

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Question #2

A firm's current ratio is 2.5:1. If current assets are ₹5,00,000, current liabilities are:

A. ₹2,00,000

B. ₹2,50,000

C. ₹5,00,000

D. ₹1,25,000

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Correct Answer: Option A

Explanation:
2.5 = 5,00,000 / CL => CL = 5,00,000 / 2.5 = ₹2,00,000.

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Question #3

The 'Expected Credit Loss' for trade receivables:

A. Always requires 12-month ECL

B. Only when default occurs

C. No impairment

D. Can use simplified approach (lifetime ECL) if there is no significant financing component

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Correct Answer: Option D

Explanation:
Ind AS 109 allows the simplified approach for trade receivables and contract assets.

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