QUICK ANSWER
Real estate proration splits an expense or income item between seller and buyer at closing. Use the amount for the full period, divide by the number of days the question gives you, then multiply by the responsible party's days. Pearson says Texas proration questions will specify whether to use 360 or 365 days and whether the closing day belongs to the buyer or seller. Accrued expenses usually create a seller debit and buyer credit. Prepaid expenses usually create a buyer debit and seller credit. Rent depends on whether it was paid in advance or collected later.
Start Here
Proration is one of those real estate math topics that feels harder than it is because the words are doing half the work.
The calculation is usually simple:
Daily amount = full amount / number of days
Then:
Proration = daily amount x number of responsible days
The hard part is deciding who gets debited and who gets credited.
That depends on three questions:
- Is the item an expense or income?
- Is it accrued or prepaid?
- Does the closing day belong to the buyer or seller?
Once those are clear, the math is mechanical.
This guide explains prorations for taxes, insurance, and rent at closing in Texas real estate exam terms. It also gives you the practical debit and credit rules, 360-day and 365-day examples, closing-day treatment, worked examples, and a full practice set.
Table Of Contents
- What proration math appears on the Texas real estate exam?
- The proration formula
- The four words that matter
- Debit and credit logic
- Closing-day treatment
- 360-day vs 365-day methods
- Property tax prorations
- Insurance prorations
- Rent prorations
- Worked examples
- Practice set
- Answer key and explanations
- Common mistakes
- FAQ
What Proration Math Appears On The Texas Real Estate Exam?
Pearson VUE's Texas sales content outline lists "Settlement and closing costs" under Real Estate Math Calculations. That category includes prorated items, debits, and credits.
The outline also lists monthly mortgage calculations, taxes and insurance, net to the seller, cost to the buyer, transfer tax, and recording fees.
So proration can appear in several ways:
| Exam context | What it may test |
|---|---|
| Closing costs | Who owes what at settlement |
| Seller net | Seller debit or seller credit |
| Cost to buyer | Buyer debit or buyer credit |
| Property taxes | Accrued tax for seller period |
| Insurance | Prepaid premium or escrow-type item |
| Rent | Rent paid in advance or collected after closing |
| Debits and credits | Which side receives the adjustment |
Pearson's handbook also gives a key test-taking rule: if a question requires prorated amounts, the question will specify whether the calculation should use 360 or 365 days and whether the closing day belongs to the buyer or seller.
That means you do not need to invent a rule.
Use the rule in the question.
This article uses original educational practice examples, not copied exam questions.
The Proration Formula
The formula is:
Proration = daily amount x responsible days
To get the daily amount:
Daily amount = full amount / days in period
For an annual item:
Daily amount = annual amount / 360 or 365
For a monthly item:
Daily amount = monthly amount / days in month
For a quarterly item:
Daily amount = quarterly amount / days in quarter
The question should tell you the period and day-count method.
Core formula sheet
| Need | Formula |
|---|---|
| Daily annual amount using 365 | Annual amount / 365 |
| Daily annual amount using 360 | Annual amount / 360 |
| Daily monthly amount | Monthly amount / days in month |
| Seller proration | Daily amount x seller days |
| Buyer proration | Daily amount x buyer days |
| Annual amount from monthly amount | Monthly amount x 12 |
| Monthly amount from annual amount | Annual amount / 12 |
| Total rent | Rent per unit x number of units |
| Tax proration | Annual tax / day-count basis x seller or buyer days |
The Four Words That Matter
To solve proration questions, learn these four words:
| Word | Meaning |
|---|---|
| Accrued | Owed but not yet paid or collected |
| Prepaid | Paid or collected in advance |
| Debit | Charge to that party |
| Credit | Benefit to that party |
The exam may not always use the word "accrued" or "prepaid." It may say:
- Taxes are paid in arrears.
- The seller has already paid the annual premium.
- Rent was collected on the first day of the month.
- Rent is collected at the end of the month.
- The buyer will pay the bill after closing.
- The seller paid the bill before closing.
Translate the fact pattern before calculating.
Debit And Credit Logic
This is the heart of proration.
Accrued expense
An accrued expense has been incurred but not yet paid.
Common exam example:
Property taxes are paid in arrears. The seller owned the property for part of the tax year, but the buyer may pay the full tax bill later.
Seller owes buyer for the seller's period.
Result:
| Party | Entry |
|---|---|
| Seller | Debit |
| Buyer | Credit |
Plain English:
The seller is charged. The buyer receives the credit because the buyer may later pay a bill that includes the seller's ownership period.
Prepaid expense
A prepaid expense has already been paid by the seller for a period that extends after closing.
Example:
The seller prepaid an annual insurance premium that benefits the buyer after closing, and the question says it is transferable or being adjusted.
Buyer owes seller for the buyer's period.
Result:
| Party | Entry |
|---|---|
| Buyer | Debit |
| Seller | Credit |
Plain English:
The buyer is charged. The seller is reimbursed for the part of the item that benefits the buyer.
Prepaid income
Prepaid income has already been collected by the seller for a period that extends after closing.
Common exam example:
Tenant paid rent on the first day of the month. Closing happens mid-month. The seller already collected rent for days the buyer will own the property.
Seller owes buyer for the buyer's period.
Result:
| Party | Entry |
|---|---|
| Seller | Debit |
| Buyer | Credit |
Plain English:
The seller gives the buyer the rent that belongs to the buyer's ownership period.
Accrued income
Accrued income has been earned but not yet collected.
Example:
Rent is collected at the end of the month. Closing happens mid-month. The buyer will collect rent later, but the seller earned rent for the seller's ownership period.
Buyer owes seller for the seller's period.
Result:
| Party | Entry |
|---|---|
| Buyer | Debit |
| Seller | Credit |
Plain English:
The buyer is charged because the buyer will collect money that partly belongs to the seller.
Quick debit and credit table
| Item type | Example | Debit | Credit |
|---|---|---|---|
| Accrued expense | Taxes paid later | Seller | Buyer |
| Prepaid expense | Seller prepaid transferable insurance | Buyer | Seller |
| Prepaid income | Seller collected rent in advance | Seller | Buyer |
| Accrued income | Buyer will collect rent later | Buyer | Seller |
If you memorize one thing, memorize this:
Accrued expenses: seller debit, buyer credit.
Prepaid expenses: buyer debit, seller credit.
Prepaid rent income: seller debit, buyer credit.
Accrued rent income: buyer debit, seller credit.
Closing-Day Treatment
Closing-day treatment means deciding who owns or is responsible for the day of closing.
Pearson says the exam question will specify whether the closing day belongs to the buyer or seller for proration purposes.
So do not assume.
The question may say:
- The day of closing belongs to the buyer.
- The day of closing belongs to the seller.
- Charge the seller through the day before closing.
- Charge the seller through the day of closing.
- Buyer is responsible beginning on the closing date.
- Buyer is responsible beginning the day after closing.
Those phrases all affect the day count.
If closing day belongs to the buyer
Seller owns up to the day before closing.
Buyer owns starting on closing day.
Example:
Closing date: April 15
Closing day belongs to buyer
Seller days in April:
April 1 through April 14 = 14 days
Buyer days in April:
April 15 through April 30 = 16 days
If closing day belongs to the seller
Seller owns through the day of closing.
Buyer owns starting the day after closing.
Example:
Closing date: April 15
Closing day belongs to seller
Seller days in April:
April 1 through April 15 = 15 days
Buyer days in April:
April 16 through April 30 = 15 days
Common month day counts
Use the day count given in the question. If the question uses calendar days in a named month, remember:
| Month | Days |
|---|---|
| January | 31 |
| February | 28, unless leap year is specified |
| March | 31 |
| April | 30 |
| May | 31 |
| June | 30 |
| July | 31 |
| August | 31 |
| September | 30 |
| October | 31 |
| November | 30 |
| December | 31 |
For annual prorations, the question should tell you 360 or 365 when it matters.
360-Day Vs 365-Day Methods
This is another place candidates overthink.
The exam question will tell you which method to use when the method matters.
360-day method
The 360-day method treats the year as 360 days.
It is often paired with 30-day months in simplified real estate math.
Example:
Annual tax: $7,200
Use 360 days
$7,200 / 360 = $20 per day
365-day method
The 365-day method uses a normal 365-day year.
Example:
Annual tax: $7,200
Use 365 days
$7,200 / 365 = $19.726...
Rounded daily amount:
$19.73
Same facts, different answers
Annual tax: $7,200
Seller responsible for 120 days
Using 360:
$7,200 / 360 = $20
$20 x 120 = $2,400
Using 365:
$7,200 / 365 = $19.726...
$19.726... x 120 = $2,367.12
Both answers can be correct depending on the question.
Use the method stated.
Property Tax Prorations
Property tax is the most common proration topic because taxes are often allocated between seller and buyer at closing.
Texas caveat: Texas has no state property tax. Local governments set and collect property taxes. The Texas Comptroller explains that appraisal districts appraise property as of Jan. 1 and that many taxes are generally due by Jan. 31 of the following year.
For exam math, the key is not to become a tax expert. The key is to recognize the fact pattern.
If taxes are paid in arrears, the seller usually owes the buyer for the seller's ownership period.
That means:
| Party | Entry |
|---|---|
| Seller | Debit |
| Buyer | Credit |
Tax proration example using 365 days
Annual taxes: $8,760
Closing date: June 30
Use 365 days
Closing day belongs to buyer
Assume seller period is January 1 through June 29
Seller days: 180
Daily tax:
$8,760 / 365 = $24
Seller proration:
$24 x 180 = $4,320
Entry:
| Party | Entry |
|---|---|
| Seller | Debit $4,320 |
| Buyer | Credit $4,320 |
Why?
The seller owned the property for 180 days of the tax year. If the buyer later pays the tax bill, the buyer needs credit for the seller's portion.
Tax proration example using 360 days
Annual taxes: $8,640
Closing date: April 10
Use 360 days
Use 30-day months
Closing day belongs to seller
Seller days:
January through March = 90 days
April 1 through April 10 = 10 days
Total = 100 days
Daily tax:
$8,640 / 360 = $24
Seller proration:
$24 x 100 = $2,400
Entry:
| Party | Entry |
|---|---|
| Seller | Debit $2,400 |
| Buyer | Credit $2,400 |
Insurance Prorations
Insurance proration depends on the fact pattern.
Real-world hazard insurance policies may not simply transfer from seller to buyer. But exam questions may still use insurance as a prepaid item to test proration math.
So follow the question.
If the seller prepaid an insurance premium and the question says the buyer will benefit from the remaining coverage or reimburse the seller, treat it as a prepaid expense.
Prepaid expense result:
| Party | Entry |
|---|---|
| Buyer | Debit |
| Seller | Credit |
Insurance proration example
Annual insurance premium: $1,800
Policy year: January 1 through December 31
Closing date: September 1
Closing day belongs to buyer
Use 365 days
Seller prepaid the premium
Buyer reimburses seller for unused coverage
Buyer days:
September 1 through December 31:
September = 30 days
October = 31 days
November = 30 days
December = 31 days
Total = 122 days
Daily premium:
$1,800 / 365 = $4.9315...
Buyer reimbursement:
$4.9315... x 122 = $601.64
Entry:
| Party | Entry |
|---|---|
| Buyer | Debit $601.64 |
| Seller | Credit $601.64 |
Why?
The seller already paid for coverage. The buyer is reimbursing the seller for the buyer's benefit period.
Insurance escrow warning
Do not confuse insurance proration with escrow deposits.
A buyer may have to prepay homeowner's insurance or set up an escrow account with a lender. That can be part of closing costs. But if the question asks for a proration between seller and buyer, solve the seller-buyer adjustment only.
Rent Prorations
Rent prorations feel different because rent is income.
The key question is:
Was rent collected in advance or will it be collected later?
Rent paid in advance
Rent paid in advance means the seller already collected money for time after closing.
The buyer should receive the rent for the buyer's ownership period.
Result:
| Party | Entry |
|---|---|
| Seller | Debit |
| Buyer | Credit |
Rent collected later
Rent collected later means the buyer will collect rent after closing, but part of that rent belongs to the seller's ownership period.
The buyer owes the seller for the seller's earned portion.
Result:
| Party | Entry |
|---|---|
| Buyer | Debit |
| Seller | Credit |
Rent paid in advance example
Monthly rent: $2,400
Rent was paid on June 1 for the full month of June
Closing date: June 18
Closing day belongs to buyer
June has 30 days
Buyer owns June 18 through June 30:
13 days
Daily rent:
$2,400 / 30 = $80
Buyer share:
$80 x 13 = $1,040
Entry:
| Party | Entry |
|---|---|
| Seller | Debit $1,040 |
| Buyer | Credit $1,040 |
Why?
The seller collected the full month of rent. The buyer owns the property for 13 days of that month. The seller owes the buyer those 13 days of rent.
Rent collected later example
Monthly rent: $2,400
Rent is collected at the end of June
Closing date: June 18
Closing day belongs to buyer
June has 30 days
Seller owns June 1 through June 17:
17 days
Daily rent:
$2,400 / 30 = $80
Seller share:
$80 x 17 = $1,360
Entry:
| Party | Entry |
|---|---|
| Buyer | Debit $1,360 |
| Seller | Credit $1,360 |
Why?
The buyer will collect the rent later, but the seller earned 17 days of it before closing.
Practice Closing Math Until It Feels Automatic
Use the Texas real estate exam prep app to practice tax, insurance, and rent prorations with 360-day, 365-day, buyer-closing-day, and seller-closing-day examples. Native Texas exam prep. Original questions. No copied exam questions. Not affiliated with TREC or Pearson VUE. Not a 180-hour pre-license course or a pass guarantee.
Worked Examples
1. Tax Proration, Closing Day Buyer
Annual taxes are $6,570. Closing is April 15. Use 365 days. Closing day belongs to buyer. Taxes are paid in arrears. What is the seller debit and buyer credit?
Seller days:
January 1 through April 14:
January = 31
February = 28
March = 31
April 1 through April 14 = 14
Total = 104 days
Daily tax:
$6,570 / 365 = $18
Seller proration:
$18 x 104 = $1,872
Answer:
| Party | Entry |
|---|---|
| Seller | Debit $1,872 |
| Buyer | Credit $1,872 |
2. Tax Proration, Closing Day Seller
Annual taxes are $6,570. Closing is April 15. Use 365 days. Closing day belongs to seller. Taxes are paid in arrears. What is the seller debit and buyer credit?
Seller days:
January 1 through April 15:
31 + 28 + 31 + 15 = 105 days
Daily tax:
$6,570 / 365 = $18
Seller proration:
$18 x 105 = $1,890
Answer:
| Party | Entry |
|---|---|
| Seller | Debit $1,890 |
| Buyer | Credit $1,890 |
The one-day difference matters.
3. Tax Proration Using 360 Days
Annual taxes are $9,000. Closing is May 20. Use a 360-day year and 30-day months. Closing day belongs to buyer. Taxes are paid in arrears.
Seller days:
January through April = 120 days
May 1 through May 19 = 19 days
Total = 139 days
Daily tax:
$9,000 / 360 = $25
Seller proration:
$25 x 139 = $3,475
Answer:
| Party | Entry |
|---|---|
| Seller | Debit $3,475 |
| Buyer | Credit $3,475 |
4. Prepaid Insurance
The seller prepaid a transferable insurance premium of $1,460 for the calendar year. Closing is October 1. Use 365 days. Closing day belongs to buyer. What is the buyer debit and seller credit for the unused premium?
Buyer days:
October 1 through December 31:
October = 31
November = 30
December = 31
Total = 92 days
Daily premium:
$1,460 / 365 = $4
Buyer share:
$4 x 92 = $368
Answer:
| Party | Entry |
|---|---|
| Buyer | Debit $368 |
| Seller | Credit $368 |
5. Rent Paid In Advance
Monthly rent is $3,000 and was collected by the seller on July 1 for the full month. Closing is July 12. Closing day belongs to buyer. July has 31 days. What is the seller debit and buyer credit?
Buyer days:
July 12 through July 31:
20 days
Daily rent:
$3,000 / 31 = $96.774...
Buyer share:
$96.774... x 20 = $1,935.48
Answer:
| Party | Entry |
|---|---|
| Seller | Debit $1,935.48 |
| Buyer | Credit $1,935.48 |
6. Rent Collected Later
Monthly rent is $3,000 and will be collected at the end of July. Closing is July 12. Closing day belongs to buyer. July has 31 days. What is the buyer debit and seller credit?
Seller days:
July 1 through July 11:
11 days
Daily rent:
$3,000 / 31 = $96.774...
Seller share:
$96.774... x 11 = $1,064.52
Answer:
| Party | Entry |
|---|---|
| Buyer | Debit $1,064.52 |
| Seller | Credit $1,064.52 |
7. Annual Rent Paid Monthly In Advance
An apartment property has four units. Each unit rents for $1,250 per month. Rent was collected on May 1 for the full month. Closing is May 21. Closing day belongs to seller. May has 31 days. What is the rent proration?
Total monthly rent:
4 x $1,250 = $5,000
Buyer days:
Closing day belongs to seller, so buyer starts May 22.
May 22 through May 31 = 10 days
Daily rent:
$5,000 / 31 = $161.290...
Buyer share:
$161.290... x 10 = $1,612.90
Answer:
| Party | Entry |
|---|---|
| Seller | Debit $1,612.90 |
| Buyer | Credit $1,612.90 |
8. Prepaid Expense With 360-Day Method
The seller prepaid a $2,400 annual service contract that will be assigned to the buyer. Closing is August 10. Use 360 days and 30-day months. Closing day belongs to buyer. What is the buyer debit and seller credit?
Buyer days:
August 10 through August 30 = 21 days
September through December = 120 days
Total = 141 days
Daily amount:
$2,400 / 360 = $6.666...
Buyer share:
$6.666... x 141 = $940
Answer:
| Party | Entry |
|---|---|
| Buyer | Debit $940 |
| Seller | Credit $940 |
Practice Set
Try these without looking at the answer key.
1. Tax Proration 365, Buyer Closing Day
Annual property taxes are $7,300. Closing is March 15. Use 365 days. Closing day belongs to buyer. Taxes are paid in arrears. What is the seller debit and buyer credit?
2. Tax Proration 365, Seller Closing Day
Annual property taxes are $7,300. Closing is March 15. Use 365 days. Closing day belongs to seller. Taxes are paid in arrears. What is the seller debit and buyer credit?
3. Tax Proration 360
Annual property taxes are $10,800. Closing is June 20. Use a 360-day year and 30-day months. Closing day belongs to buyer. Taxes are paid in arrears. What is the seller debit and buyer credit?
4. Prepaid Insurance
The seller prepaid a transferable annual insurance premium of $2,190. Closing is September 1. Use 365 days. Closing day belongs to buyer. What is the buyer debit and seller credit?
5. Rent Paid In Advance
Monthly rent is $2,700. Rent was collected on August 1 for the full month. Closing is August 18. Closing day belongs to buyer. August has 31 days. What is the seller debit and buyer credit?
6. Rent Collected Later
Monthly rent is $2,700. Rent will be collected at the end of August. Closing is August 18. Closing day belongs to buyer. August has 31 days. What is the buyer debit and seller credit?
7. Rent Paid In Advance, Seller Closing Day
Monthly rent is $4,200. Rent was collected on November 1 for the full month. Closing is November 10. Closing day belongs to seller. November has 30 days. What is the seller debit and buyer credit?
8. Rent Collected Later, Seller Closing Day
Monthly rent is $4,200. Rent will be collected at the end of November. Closing is November 10. Closing day belongs to seller. November has 30 days. What is the buyer debit and seller credit?
9. Annual Expense Using 360 Days
The seller prepaid an annual service contract of $3,600. Closing is July 15. Use a 360-day year and 30-day months. Closing day belongs to buyer. The contract transfers to the buyer. What is the buyer debit and seller credit?
10. Annual Expense Using 365 Days
The seller prepaid an annual service contract of $3,650. Closing is July 15. Use 365 days. Closing day belongs to buyer. Assume July has 31 days and the contract transfers to the buyer. What is the buyer debit and seller credit?
11. Multi-Unit Rent Paid In Advance
A property has three units rented at $1,400 each per month. Rent was collected on April 1 for the full month. Closing is April 16. Closing day belongs to buyer. April has 30 days. What is the seller debit and buyer credit?
12. Tax Proration With Daily Amount Given
The daily property tax amount is $32. Closing is May 5. Closing day belongs to seller. Taxes are paid in arrears. What is the seller debit and buyer credit for January 1 through closing?
13. Prepaid Rent With Daily Amount Given
Rent was collected in advance. The daily rent is $95. Closing is October 20. Closing day belongs to buyer. October has 31 days. What is the seller debit and buyer credit for the buyer's period?
14. Accrued Rent With Daily Amount Given
Rent will be collected later. The daily rent is $95. Closing is October 20. Closing day belongs to buyer. What is the buyer debit and seller credit for the seller's period?
15. Identify The Entry
Taxes are paid in arrears. The buyer will receive the tax bill after closing, and the seller owned the property for part of the tax year. Is the seller debited or credited?
Answer Key And Explanations
1. Tax Proration 365, Buyer Closing Day
Daily tax:
$7,300 / 365 = $20
Seller days:
January 1 through March 14:
31 + 28 + 14 = 73 days
Proration:
$20 x 73 = $1,460
Answer:
| Party | Entry |
|---|---|
| Seller | Debit $1,460 |
| Buyer | Credit $1,460 |
2. Tax Proration 365, Seller Closing Day
Daily tax:
$7,300 / 365 = $20
Seller days:
January 1 through March 15:
31 + 28 + 15 = 74 days
Proration:
$20 x 74 = $1,480
Answer:
| Party | Entry |
|---|---|
| Seller | Debit $1,480 |
| Buyer | Credit $1,480 |
3. Tax Proration 360
Daily tax:
$10,800 / 360 = $30
Seller days:
January through May = 150 days
June 1 through June 19 = 19 days
Total = 169 days
Proration:
$30 x 169 = $5,070
Answer:
| Party | Entry |
|---|---|
| Seller | Debit $5,070 |
| Buyer | Credit $5,070 |
4. Prepaid Insurance
Daily premium:
$2,190 / 365 = $6
Buyer days:
September 1 through December 31:
30 + 31 + 30 + 31 = 122 days
Proration:
$6 x 122 = $732
Answer:
| Party | Entry |
|---|---|
| Buyer | Debit $732 |
| Seller | Credit $732 |
5. Rent Paid In Advance
Daily rent:
$2,700 / 31 = $87.096...
Buyer days:
August 18 through August 31:
14 days
Proration:
$87.096... x 14 = $1,219.35
Answer:
| Party | Entry |
|---|---|
| Seller | Debit $1,219.35 |
| Buyer | Credit $1,219.35 |
6. Rent Collected Later
Daily rent:
$2,700 / 31 = $87.096...
Seller days:
August 1 through August 17:
17 days
Proration:
$87.096... x 17 = $1,480.65
Answer:
| Party | Entry |
|---|---|
| Buyer | Debit $1,480.65 |
| Seller | Credit $1,480.65 |
7. Rent Paid In Advance, Seller Closing Day
Daily rent:
$4,200 / 30 = $140
Buyer days:
Closing day belongs to seller, so buyer starts November 11.
November 11 through November 30 = 20 days
Proration:
$140 x 20 = $2,800
Answer:
| Party | Entry |
|---|---|
| Seller | Debit $2,800 |
| Buyer | Credit $2,800 |
8. Rent Collected Later, Seller Closing Day
Daily rent:
$4,200 / 30 = $140
Seller days:
Closing day belongs to seller.
November 1 through November 10 = 10 days
Proration:
$140 x 10 = $1,400
Answer:
| Party | Entry |
|---|---|
| Buyer | Debit $1,400 |
| Seller | Credit $1,400 |
9. Annual Expense Using 360 Days
Daily amount:
$3,600 / 360 = $10
Buyer days:
Closing day belongs to buyer.
July 15 through July 30 = 16 days
August through December = 150 days
Total = 166 days
Proration:
$10 x 166 = $1,660
Answer:
| Party | Entry |
|---|---|
| Buyer | Debit $1,660 |
| Seller | Credit $1,660 |
10. Annual Expense Using 365 Days
Daily amount:
$3,650 / 365 = $10
Buyer days:
July 15 through December 31:
July 15 through July 31 = 17 days
August = 31
September = 30
October = 31
November = 30
December = 31
Total = 170 days
Proration:
$10 x 170 = $1,700
Answer:
| Party | Entry |
|---|---|
| Buyer | Debit $1,700 |
| Seller | Credit $1,700 |
11. Multi-Unit Rent Paid In Advance
Monthly rent:
3 x $1,400 = $4,200
Daily rent:
$4,200 / 30 = $140
Buyer days:
April 16 through April 30:
15 days
Proration:
$140 x 15 = $2,100
Answer:
| Party | Entry |
|---|---|
| Seller | Debit $2,100 |
| Buyer | Credit $2,100 |
12. Tax Proration With Daily Amount Given
Seller days:
January 1 through May 5, closing day seller:
January = 31
February = 28
March = 31
April = 30
May 1 through May 5 = 5
Total = 125 days
Proration:
$32 x 125 = $4,000
Answer:
| Party | Entry |
|---|---|
| Seller | Debit $4,000 |
| Buyer | Credit $4,000 |
13. Prepaid Rent With Daily Amount Given
Buyer days:
October 20 through October 31:
12 days
Proration:
$95 x 12 = $1,140
Answer:
| Party | Entry |
|---|---|
| Seller | Debit $1,140 |
| Buyer | Credit $1,140 |
14. Accrued Rent With Daily Amount Given
Seller days:
October 1 through October 19:
19 days
Proration:
$95 x 19 = $1,805
Answer:
| Party | Entry |
|---|---|
| Buyer | Debit $1,805 |
| Seller | Credit $1,805 |
15. Identify The Entry
Taxes paid in arrears are an accrued expense.
The seller is responsible for the seller's ownership period.
Answer: seller debit, buyer credit.
Common Mistakes
Mistake 1: Ignoring Closing-Day Treatment
The closing day can change the answer by one full day.
If the closing day belongs to the buyer, the buyer starts on closing day.
If the closing day belongs to the seller, the buyer starts the day after closing.
Mistake 2: Assuming 360 Or 365
Pearson says the question will specify the basis if the calculation requires it.
Use what the question says.
Do not bring a rule from a different practice problem.
Mistake 3: Treating All Rent The Same
Rent paid in advance and rent collected later move in opposite directions.
Prepaid rent:
Seller debit, buyer credit
Rent collected later:
Buyer debit, seller credit
Mistake 4: Forgetting That Taxes Are Usually Accrued
If taxes are paid in arrears, the seller owes the buyer for the seller's portion.
That is seller debit, buyer credit.
Mistake 5: Solving The Right Amount For The Wrong Side
You can calculate the correct dollar amount and still miss the question if you reverse debit and credit.
Always write the party and entry next to the amount.
Mistake 6: Rounding Too Early
Keep extra decimals until the final step when possible.
If the daily amount is $96.774..., multiply before rounding the final answer.
Mistake 7: Confusing Prepaid Expense With Prepaid Income
Prepaid insurance is an expense.
Prepaid rent is income.
The word "prepaid" alone is not enough. Ask what kind of item it is.
How To Study Proration
Use a three-part drill.
Step 1: Identify The Type
Before calculating, label the item:
| Fact pattern | Label |
|---|---|
| Taxes paid later | Accrued expense |
| Seller prepaid insurance | Prepaid expense |
| Seller collected rent in advance | Prepaid income |
| Buyer will collect rent later | Accrued income |
Step 2: Decide Debit And Credit
Write the entry before doing the math.
Example:
Taxes paid in arrears = seller debit, buyer credit
Then calculate.
Step 3: Count Days Slowly
Do not rush day counts.
Write:
Closing day buyer = seller stops day before closing
or:
Closing day seller = seller includes closing day
Then count the days.
Where This Fits In The Texas Math Cluster
Proration sits between settlement math, tax math, rent math, and closing-cost logic.
| If you need help with | Read next |
|---|---|
| Full math strategy | Texas real estate math: the only guide you need |
| Percent and part-whole math | The T-bar / circle method explained |
| Property taxes | Property tax and mill-rate calculations |
| Loan closing costs | Loan-to-value, down payment, and points |
| Commission and seller net | Commission and split calculations |
| Area and acreage | Area, acreage, and square-footage problems |
FAQ
What is proration in real estate?
Proration is the process of dividing an expense or income item between buyer and seller at closing. The item is split based on each party's period of ownership or responsibility.
What is the proration formula?
The basic formula is daily amount times responsible days. First divide the full amount by the number of days in the period. Then multiply by the days assigned to the buyer or seller.
Does the Texas real estate exam use 360 or 365 days?
Pearson says that if a proration question requires a 360-day or 365-day basis, the question will specify which basis to use. Use the number given in the question.
Who gets the day of closing?
Use the question. Pearson says the question will specify whether the closing day belongs to the buyer or seller when that matters for proration.
Are property taxes a seller debit or buyer debit?
If property taxes are paid in arrears, they are usually treated as an accrued expense. The seller is debited and the buyer is credited for the seller's period.
Is prepaid insurance a buyer debit or seller debit?
If the seller prepaid an insurance item that benefits the buyer after closing and the question says it is being adjusted, it is usually a buyer debit and seller credit.
Is rent a seller debit or buyer debit?
It depends on whether rent was paid in advance or collected later. If the seller already collected rent for the buyer's period, the seller is debited and buyer is credited. If the buyer will collect rent later for the seller's period, the buyer is debited and seller is credited.
What is the easiest way to avoid proration mistakes?
Before calculating, write four things: accrued or prepaid, expense or income, buyer or seller owns closing day, and debit or credit. Then do the math.
Should I practice prorations in the app?
Yes. Proration is one of the best topics to drill because the same logic repeats with different dates and facts. The Texas real estate exam prep app gives you original proration questions for taxes, insurance, rent, debits, credits, 360-day methods, 365-day methods, and closing-day treatment. Native Texas exam prep. Original questions. No copied exam questions. Not affiliated with TREC or Pearson VUE. Not a 180-hour pre-license course or a pass guarantee.
Are these copied exam questions?
No. The examples and practice questions in this article are original educational practice questions. The Texas real estate exam prep app also uses original questions. Native Texas exam prep. Original questions. No copied exam questions. Not affiliated with TREC or Pearson VUE. Not a 180-hour pre-license course or a pass guarantee.
Verification Note
This article was verified against the current Pearson VUE Texas real estate content outline, the Pearson VUE candidate handbook, Texas Comptroller property tax guidance, and CFPB closing-cost education.
It is for educational exam prep, not legal, tax, mortgage, insurance, or closing advice. Real transaction prorations can depend on contracts, local practice, lender instructions, title company calculations, tax bills, insurance terms, leases, and negotiated agreements. For exam purposes, use the facts in the question.