If the gross value including 5% VAT is 105, what is the net value?

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Study for the AAT Level 2 Introduction to Bookkeeping Test. Use flashcards and multiple choice questions with hints and explanations. Prepare effectively for your exam!

Multiple Choice

If the gross value including 5% VAT is 105, what is the net value?

Explanation:
When a price includes VAT, the gross value is the net value increased by the VAT rate. For 5% VAT, gross = net × 1.05. To find the net value from a gross of 105, divide by 1.05: 105 ÷ 1.05 = 100. Check: net 100 plus 5% of 100 (which is 5) gives 105, so the net value is 100.

When a price includes VAT, the gross value is the net value increased by the VAT rate. For 5% VAT, gross = net × 1.05. To find the net value from a gross of 105, divide by 1.05: 105 ÷ 1.05 = 100. Check: net 100 plus 5% of 100 (which is 5) gives 105, so the net value is 100.

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