Where this fits on the exam
| Official syllabus topic | Finance and Closing: Closing Procedures |
|---|---|
| Official PSI group | Finance and Closing |
| Published group count | 15 of the 52 Georgia questions |
| Exam portion | Georgia salesperson supplement |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 2026 |
The Rule
PSI publishes 16, 21, and 15 items for the three Georgia groups. It does not publish a guaranteed subtopic count. The statute, current GREC rule, contract, or other cited primary authority controls each lesson.
The lesson
Debits and credits
A buyer debit increases buyer funds due; a buyer credit reduces them. A seller debit reduces proceeds; a seller credit increases them.
Major buyer entries
Purchase price and buyer-paid costs are debits, while loan proceeds, deposit, seller credit, and qualifying adjustments are credits.
Major seller entries
Sale price is a seller credit. Payoffs, seller-paid costs, commissions, taxes, and agreed credits commonly debit seller proceeds.
Proration
Determine the annual or periodic amount, daily or monthly convention, responsible days, and whether the item was prepaid or remains unpaid.
Decision rule
Georgia rule and national contrast
Worked Georgia example
Scenario. The seller prepaid a full year of property tax, and the buyer will own the property for the remainder of that year after closing.
Reason it through. The buyer reimburses the seller for the buyer's ownership period. That is a buyer debit and seller credit for the prorated amount.
Answer. Debit the buyer and credit the seller for the buyer's share of the prepaid tax.
Common exam traps
- Using debit as always bad for both parties
- Ignoring prepaid versus unpaid
- Counting from the wrong date
- Confusing deposit with an extra charge
Original practice questions with detailed explanations
These are original instructional questions mapped to the July 1, 2026 PSI outline. They are not copied from PSI or a live examination. Choose an answer before opening the explanation.
Question 1The seller paid the full year's property tax of $3,650. Using a 365-day year, the buyer will own the property for 146 days of that tax year. Which entry is correct?
- A. Credit the buyer $1,460 and debit the seller $1,460
- B. Debit the buyer $2,190 and credit the seller $2,190
- C. Debit the buyer $1,460 and credit the seller $1,460
- D. Credit the buyer $2,190 and debit the seller $2,190
Show answer and explanation →
Answer: C. Debit the buyer $1,460 and credit the seller $1,460
The daily rate is $3,650 ÷ 365 = $10, so the buyer's 146 days come to $1,460. Because the seller already paid the whole year, the buyer reimburses that share as a buyer debit and a seller credit. Reversing the entries treats a prepaid tax as if it were still unpaid.
- A. Incorrect. This reverses the reimbursement entries for a tax the seller already paid.
- B. Incorrect. $2,190 is the seller's 219-day share, not the buyer's 146-day reimbursement.
- C. Correct. The buyer's 146 days cost $1,460; debit the buyer and credit the seller who prepaid it.
- D. Incorrect. This uses the seller's day count and also reverses the prepaid-tax direction.
Question 2The buyer deposited $5,000 in earnest money when the contract was signed. How does it appear on the buyer's side at closing?
- A. As a debit, because it is money the buyer paid
- B. As a credit, because it reduces the cash still owed
- C. As a debit, because it is added to the purchase price
- D. It does not appear, because it was paid before closing
Show answer and explanation →
Answer: B. As a credit, because it reduces the cash still owed
A buyer credit reduces the funds the buyer must bring to closing, and money already deposited toward the price does exactly that. The deposit is not an extra charge on top of the price. The debit answers come from treating any payment as a debit instead of asking whether it adds to or reduces what the buyer owes.
- A. Incorrect. At closing, the previously paid deposit reduces cash still due rather than creating a new charge.
- B. Correct. The $5,000 already paid is credited against the buyer's remaining closing obligation.
- C. Incorrect. Earnest money counts toward the agreed price instead of increasing it.
- D. Incorrect. The closing statement must account for that existing deposit to avoid collecting it twice.
Question 3This year's county property taxes are unpaid at closing, and the buyer will pay the full bill when it comes due. How is the seller's share handled?
- A. Debit the seller and credit the buyer for the seller's days
- B. Debit the buyer and credit the seller for the seller's days
- C. Debit the seller and credit the buyer for the full year
- D. No entry, because the buyer will pay the whole bill later
Show answer and explanation →
Answer: A. Debit the seller and credit the buyer for the seller's days
For an unpaid item, the buyer will pay the whole bill later, so the seller must hand over the share for the days the seller owned the property. That is a seller debit and a buyer credit. The reversed answer treats an unpaid tax like a prepaid one, which is why the first question is always whether the item has been paid.
- A. Correct. The seller contributes the seller-period share as a debit, and the buyer receives a credit before paying the later bill.
- B. Incorrect. These entries would reimburse a seller who had prepaid, contrary to the unpaid-tax facts.
- C. Incorrect. Only the seller's ownership-period share is allocated to the seller, not the full year.
- D. Incorrect. A credit is still needed so the buyer does not bear the seller's share of the later bill.
Ready to move on?
You are ready for the next lesson when all of these are true.
- Explain how a buyer debit differs from a seller debit.
- Count loan proceeds and earnest money once as buyer credits.
- Decide who owes whom for an unpaid tax bill and a prepaid expense.
- Answer the practice questions without looking back, then explain why the other choices fail.
- Explain the worked example in your own words and identify the fact that decides the answer.
- Retest this topic on another day in a mixed question set.
Recommended next lesson
Continue with Georgia Transfer Tax and Intangible Recording Tax. Two of the charges on a Georgia settlement statement are state taxes with different bases, and the next article shows how transfer tax is figured on the sale consideration while intangible recording tax is figured on the long-term note.
Return to the Finance and Closing hub for the complete official branch and the full lesson list for this Georgia group.