How is VAT calculated on a sale transaction?

The calculation of VAT on a sale transaction is done by multiplying the net sale price by the VAT rate. This method ensures that VAT is accurately applied to the sale of goods or services based on their value. The net sale price excludes any VAT already charged and reflects the actual revenue generated from the sale. Once you have the net sale price, applying the relevant VAT rate gives you the amount of VAT to be added on top of the net sale price, effectively determining the total price that a customer will pay.

Other options, while relevant to different aspects of business finance, do not pertain to how VAT is specifically calculated. Determining gross profit involves understanding the costs and revenues beyond just the VAT, taking into account all expenses and earning eligible for tax. Calculating the average price of goods sold relates more to inventory valuation and sales performance analysis rather than VAT as it does not take into account the applicable tax rates. Summing all expenses related to a sale looks at the total costs incurred rather than focusing on the VAT that should be applied to the revenue from the sale itself. Thus, the correct method for calculating VAT is indeed by applying the VAT rate to the net sale price.