MATHEMATICAL LITERACY GRADE 10 CAPS TOPIC 4 Finance

MATHEMATICAL LITERACY GRADE 10 CAPS TOPIC 4: Finance Section 4. 6: Taxation (VAT)

Topic 4: Finance The following sections will be covered: 4. 1. Financial documents 4. 2. Tariff systems 4. 3. Income and Expenditure profit/loss, budgets 4. 4. Interest 4. 5. Banking, loans and investments 4. 6. Taxation (VAT)

Taxation (VAT) In Section 4. 6, learners will be able to: § Work with VAT in the context of shop purchases, till slips and bills. § Develop an understanding of the difference between a “VAT inclusive” value and a value “ excluding VAT”. § Investigate through calculation how a final price has been determined by adding 14% to a price excluding VAT. § Investigate through calculation the amount of VAT that has been added to a “VAT inclusive” price.

Taxation (VAT) �Value Added Tax (VAT) refers to the addition of 14% of the price of goods or services rendered. �Some basic foods are excluded from VAT e. g. bread, milk, fresh vegetables and fruit, etc. Such items are zero-rated. �VAT exclusive prices mean 14% VAT must still be added. �VAT inclusive prices mean 14% VAT has already been added.

Example 1 VAT exclusive and VAT inclusive values: a) The price of a TV, excluding VAT, is R 3 499, 99. Determine the final price including VAT. b) The price of a printer, including VAT, is R 1 424, 99. Determine: (i) the original price (ii) the VAT

Solutions Example 1 a) 14 % x R 3 4999, 99 = R 490 Final price including VAT = R 490 + R 3 499, 99 = R 3 989, 99 OR 114% x R 3 499, 99 = R 3 989, 99 OR R 3 499, 99 x 1, 14 = R 3 989, 99 Note: For VAT inclusive price, multiply the original price by 1, 14

Solutions Example 1 cont. b) (i) the original price = R 1 424, 99 ÷ 1, 14 = R 1 249, 99 Note: for original price, divide the VAT inclusive price by 1, 14 b) (ii) VAT = price including VAT – the original price = R 1 424, 99 – R 1 249, 99 = R 175, 00

Activity 1 a) Find the final price of an item if its price, excluding VAT is R 234, 50 b) Find the original price of an item if its price including VAT, is R 11 999, 99 c) Find the VAT

Solution: Activity 1 a) VAT inclusive price = R 234, 50 x 1, 14 = R 267, 33 b) Original price = R 11 999, 99 ÷ 1, 14 = R 10 526, 31 c) VAT = R 11 999, 99 – R 10 526, 31 = R 1 473, 68

Example 2 Study Lerato’s cell phone bill and answer the following questions

Example 2 a) Calculate the VAT payable on each 80 c SMS. b) Calculate the total amount due. c) Calculate the VAT on the total bill. d) What does Ahmila Cell Company do with the income received from VAT?

Solutions Example 2 a) VAT on 80 c SMS = 14% x 80 = 11, 2 cents 11 cents. b) R 276, 10. c) 14% x R 276, 10 = R 38, 65 d) They pay it to the government.

Final Assessment Questions 1 - 5 Question 1 Calculate VAT on an exclusive price of R 234, 50 A. R 23, 45 B. R 32, 83 C. R 205, 70 D. R 267, 33

Question 2 Calculate VAT on the inclusive price of R 1 034, 00. A. R 907, 02 B. R 12, 69 C. R 144, 76 D. R 126, 98

Question 3 An architect charges your father R 4 500 to draw up a new set of plans for renovations of his house. His quote is inclusive of VAT. Calculate the VAT payable on this amount. A. R 552, 63 B. 552, 63 C. R 630, 00 D. R 77, 37

Question 4 4. A retailer buys car radios from a manufacturer for R 800 each. He marks the price up by 15% and then adds 14% VAT. What price does he quote for each car radio? A. R 1 048, 80 B. 1048, 80 C. R 920, 00 D. R 1 840, 00

Question 5 Pieter bought milk, bread and fresh carrots. His bill came to R 45, 93. How much did he pay in VAT on this bill? A. R 6, 43 B. R 0, 00 C. R 5, 64 D. R 4, 29

Solutions to Final Assessment 1. B 2. D 3. C 4. A 5. B