1. By Radhika
Faculty of Management
J.H.Bhalodia College
Unit : 2 – Pricing Policies and Methods
2. Introduction
Pricing is one of the major components a full business
plan. Assigning product prices is a strategic activity.
The price you assign will impact how consumers view
your product and whether they will purchase it. Price
also helps differentiate your product from those of your
competitors.
3. Cont.
It is the most important aspects of managerial
decision-making.
If the price is set too high..
If the price is set too low..
Weather to set high price or low price depend upon
a number of factor and a wide variety of
conditions.
Not only crucial at beginning….
4. Factors Governing prices
Demand
and Supply
Goodwill of
a co.
Competition,
Trend in
Market
Purchasing
power of
Buyers
Govt. Policy
Costs &
Manageme
nt Policies
5. Objectives of Pricing Policies
1. Maximization of profits for the entire product line
2. Promotion of the long range welfare of the firm.
3. Adaption of the prices to fit the diverse competitive
situations faced by any products
4. Flexibility to vary prices to meet changes in economic
conditions affecting the various consumer industries.
5. Market Penetration
6. Market Skimming
7. Early Cash recovery
8. Stabilization of price and profit
9. Satisfaction
7. Pricing Methods
1. Cost plus pricing of Full cost Pricing
2. Rate of Return Pricing / Target Pricing
3. Going Rate Pricing
4. Skimming And Penetration
5. Multi stage Pricing
6. Peak Load Pricing
8. Cost Plus Pricing
Most Common Method
Prices are set to cover cost (material, labor, overheads)
And also has the predetermined percentage for profit
Percentage differs among industry, member firm even product
of a same firm
It denotes some vague notion of a just profit
9. Peak Load Pricing
Peak Load Pricing is a pricing strategy that implies price will
be set at the highest level during times when demand is at
a peak. The pricing strategy is an attempt to shift demand, or at
least consumption of the good or service, to accommodate
supply.
10. Peak Load Pricing
Peak Load Pricing is a pricing strategy that implies price will
be set at the highest level during times when demand is at
a peak. The pricing strategy is an attempt to shift demand, or at
least consumption of the good or service, to accommodate
supply.
11. Peak Load Pricing
Peak Load Pricing is a pricing strategy that implies price will
be set at the highest level during times when demand is at
a peak. The pricing strategy is an attempt to shift demand, or at
least consumption of the good or service, to accommodate
supply.
13. Points to be
included
1. Serial No.
2. Date
3. Name
4. Address
5. Amount
6. Particulars
7. Approval and signature
8. Revenue stamp
9. Continuous vouching
10. Cancelling the voucher
11. Period
12. Entry in the books of a/c
13. List of missing vouchers
14. Vouching of
Cash transactions
Cash book is the most important of the books of
a/c for any business. The receipts and payments are
recorded in cash book. The cash balance on any day
can be known from cash book. The entries for receipts
and payments of cash are checked with reference to
various supporting documentary evidences.
15. Objects
To ascertain that all the expenses and receipts are
shown under the correct book
To ascertain that all the expenses and receipts
are shown under the correct heads
To ensure there is no unauthorized or fraudulent
payments are made
To verify that the closing cash bank balance are
correctly struck.
16. Examining Internal Check regarding
CASH
An auditor should check internal check system in
respect of cash transaction is satisfactory and if not
there are possibilities of the frauds and defalcation.
If cash discount is given to customers then it must
be uniform.
The receipt book should be kept under the control of
responsible official.
Cash received must be deposited in bank and must
be supported by pay-in-slips.
The system of recording all receipts noted in a note
book or diary in the cash book promptly.
17. Vouching the
Receipt side of
Cash book
Vouchers
1. Opening Balance cash book of pre. yr
2. Cash Sales copies of cash memos
3. Cash Received from debtors receipts, bank pass book
4. Proceeds of Bills Receivable B/R book, pass book
5. Income for Interest and Dividend receipts, Counterfoils
6. Sale of Investments sale deed, receipt
7. Commission Received agreement,sale statement
8. Rent received Rent agreement,receipt
9. Proceeds from sale of scraped machinery plant register
10. Proceeds from sale of Fixed Assets receipt, tender
18. Cont.
11. Subscription received register of members
12. Insurance Claim insurance policy
13. Recovery of claims claim register, cash book
14. Receipts from sale hire purchase hire-purchase agreement
15. Royalty received contract of lease
16. Income of minimum rent lease agreement
17. IT refund return of income, app.
18. Dividend from Receiver receipt, passbook
19. Share Capital sh. App. & allotment
book, board’s resoltution
20. Debenture cash book, deb. App.,
board’s resolution
21. Issue of Right Shares cash book, AoA letter of
offer
19. Vouching of
the payment side of
Cash Book
i. Payments relate to the busi. Only
ii. The payment should relate to the year for which the a/c are
being audited
iii. All payments are properly approved and authenticated by
responsible officer
iv. Payments are correctly accounted for in the books of a/c
v. No payment should be left unrecorded
vi. Amount paid should be correct
vii. All payments supported by proper voucher
viii.Payment should be made to proper person
ix. Particulars should be tally with the books
x. The legality of payment should be verified
20. Vouching of
Subsidiary Books
1. Purchase book
2. Purchase return book
3. Sales book
4. Sales return book
5. Bills receivable book
6. Bills payable book
7. Journal proper
21. Journal proper
The transactions which are not recorded in the other subsidiary
books are entered in the Journal proper. The auditor should vouch
these transactions in the same manner as he does in case of cash
book transactions. He should see that each entry is supported by
supporting voucher.
a) Opening entries
b) Closing entries
c) Rectifying entries
d) Adjusting entries
e) Bad debts
f) Provision for bad debts and doubtful debts
g) Depreciation