Quick answer
Work out the daily rate, count the days allocated to each party, and decide whether the item was paid in advance or remains owed. When a stated transferable prepaid benefit extends into the buyer's period, credit the seller and debit the buyer. When the seller's allocated share remains unpaid and the buyer will receive the bill, debit the seller and credit the buyer. The question or contract controls closing day and the calculation basis.
Official syllabus mapping
This lesson maps directly to PSI XI.A.3, Real property tax and other prorations. PSI assigns the complete national calculations area 7 percent of the salesperson outline but does not publish a guaranteed proration count. This page uses the July 1, 2026 PSI bulletin.
A real estate proration calculation is arithmetic wrapped in three decisions. The arithmetic is easy. Candidates lose points on the decisions, and they lose them in the same three places every time.
Decision one: which year
Two conventions, and the question will tell you which to use.
The banker's year treats every month as 30 days and the year as 360 days.
The calendar year uses actual days, 365 or 366, and actual month lengths. It is more accurate and more tedious.
Use the method stated in the question. PSI's public outline does not establish one default basis for every Georgia exam proration. A complete problem should provide the convention or enough facts to identify it. Do not convert silence into a rule.
Decision two: who owns closing day
The contract decides. Two conventions exist, and the exam will state one:
- The seller owns the day of closing, so the seller's count includes it.
- The buyer owns the day of closing, so the seller's count stops the day before.
One day rarely changes the answer enough to move between choices, but sometimes it is put there deliberately. Read the sentence that tells you.
Decision three: paid ahead or still owing
This is the decision that flips the entire answer, so it is worth slowing down for.
| Situation | Seller | Buyer |
|---|---|---|
| Expense paid in advance, covering time after closing | Credit | Debit |
| Expense owed but not yet paid, covering time before closing | Debit | Credit |
| Rent collected in advance for the month of closing | Debit | Credit |
The logic underneath is always the same question: who has the money now, and who used the service?
A seller who prepaid a transferable annual service or assessment and closes in April may have paid for a benefit the buyer will receive after closing. Under a problem that states the item transfers and is prorated, the seller receives a credit and the buyer a debit.
Georgia Department of Revenue explains that property taxes are charged against the January 1 owner and the property, and that most counties use a later annual due date, although timing varies by county. For exam closing math, use the bill's stated payment status and the contract allocation. If the seller's allocated share remains unpaid and the buyer will receive the bill, debit the seller and credit the buyer.
Exam trap
Rents reverse the intuition. A landlord who collected September rent on the first and closes on the tenth is holding money that belongs to the buyer for the rest of the month. The seller is debited, the buyer credited. Every other prepaid item runs the other way.
Running one all the way
Annual property tax is $3,600, unpaid, on a closing dated 15 September. Use a 360-day year and give the seller the day of closing.
- Daily rate. $3,600 divided by 360 is $10 per day.
- Seller's days. January through August is 8 months at 30 days, or 240 days, plus 15 days of September, giving 255 days.
- Seller's share. 255 multiplied by $10 is $2,550.
- Entries. The tax is unpaid, so the seller is debited $2,550 and the buyer credited $2,550. The buyer pays the full $3,600 when the bill arrives and has already been compensated for the seller's part.
Now the same closing with the tax already paid in full. The seller has covered 105 days they will not own. The seller is credited $1,050 and the buyer debited $1,050.
Same daily rate, same date, opposite entries, because one fact changed.
Debits and credits, plainly
A debit is a charge against a party, money they must bring or give up. A credit is money in their favor.
The full purchase price is a debit to the buyer and a credit to the seller. Earnest money already paid is a credit to the buyer, because they have handed it over already. A new loan is a credit to the buyer, because the lender is bringing that money to the table. The seller's existing loan payoff is a debit to the seller.
The millage guide covers how the Georgia tax figure itself is produced, the math drill will keep serving prorations until the three decisions come automatically, and the formula sheet has the daily-rate setup written out.
Check yourself
1. Annual property taxes are $4,320, unpaid at closing. Closing is 1 May, using a 360-day year, with the seller responsible through the day before closing. What is the seller's share?
Show the answer
Answer: A. The daily rate is $4,320 divided by 360, which is $12. The seller owns January through April, or 120 days. 120 multiplied by $12 is $1,440.
2. A seller prepaid transferable annual association dues of $1,800 on 1 January. Closing is 1 July, using a 360-day year, and the buyer receives the remaining benefit. How is this handled?
Show the answer
Answer: B. The seller paid for six months of benefit the buyer will receive. Under the stated facts, the prepaid item is credited to the seller and debited to the buyer.
3. A tenant paid $1,500 rent for the month on 1 June. The property closes on 16 June with 30 days in the month and the buyer owning closing day. How is the rent prorated?
Show the answer
Answer: B. The seller collected rent covering days the buyer will own. Money already collected for the buyer's period is debited to the seller and credited to the buyer.
4. Which item appears as a credit to the buyer on the closing statement?
Show the answer
Answer: B. The new loan is money the lender brings on the buyer's behalf, so it is a credit to the buyer. The purchase price and the costs the buyer agreed to pay are debits.
FAQ
Which year do I use if the question does not say?
Do not turn an unstated convention into a memorized PSI rule. The public outline names prorations but does not publish one universal basis. Use 360, 365, 366, or actual calendar days when the problem tells you which method applies.
Are Georgia property taxes always treated as unpaid in a proration?
No. County due dates vary and a closing problem can state that the bill is paid or unpaid. The payment status and contract allocation determine the entries. When the seller's share remains unpaid and the buyer will later pay the bill, debit the seller and credit the buyer.
Does the closing attorney do this in practice?
Yes. In Georgia the closing attorney prepares the settlement statement and calculates the prorations. The exam still asks you to do it, because you need to be able to explain a figure to a client who queries it.
What happens to the earnest money on the statement?
It appears as a credit to the buyer, because the buyer has already paid it. It reduces what they need to bring to closing rather than adding to it.
Mastery tracking
Mark this lesson mastered when you can select the stated year basis, allocate closing day exactly once, count the correct days, determine whether the item is paid in advance or remains unpaid, calculate the amount, and balance one party's debit with the other party's equal credit.
Recommended next lesson
Continue with 360-Day Versus 365-Day Proration, then Calendar-Day Proration and Debit and Credit Rules.