Accounting Online Program Certification Practice Test 2026 - Free Certification Practice Questions and Study Guide

To accurately determine the amount that should be recorded in the sales account after excluding VAT (Value Added Tax) from a sale of £37,800, it is crucial to understand how VAT works in relation to sales prices. In the United Kingdom, the standard VAT rate is normally applied to sales, and this rate is currently 20%.

When we refer to a sale amount that includes VAT, the formula to calculate the amount excluding VAT is as follows:

Amount excluding VAT = Total Amount Including VAT / (1 + VAT Rate)

In this case, the total amount including VAT is £37,800 and the VAT rate is 20%, which can be represented as 0.20. Therefore, you would calculate it as follows:

Amount excluding VAT = £37,800 / (1 + 0.20)

Amount excluding VAT = £37,800 / 1.20

Amount excluding VAT = £31,500

The correct entry in the sales account should reflect the actual revenue earned from the sale, exclusive of VAT. Therefore, the amount recorded in the sales account of Apricot plc should be £31,500.