If a seller agrees to pay a portion of the buyer's closing costs, how is it recorded on the settlement sheet?

If a seller agrees to pay a portion of the buyer's closing costs, how is it recorded on the settlement sheet?

• A. Debit Buyer/Credit Seller
• B. Debit Seller/Credit Buyer
• C. Debit Broker/Credit Buyer
• D. Debit Buyer/Credit Broker

Answer: (B)

When a seller agrees to pay a portion of the buyer's closing costs, this transaction is reflected on the settlement sheet through a debit and credit system. In this context, the seller's contribution to the closing costs is considered a cost that reduces the overall amount the seller receives from the sale. As a result, the seller is debited for the amount they are paying towards the closing costs. Conversely, since the buyer benefits from this contribution (the buyer effectively pays less out-of-pocket at closing), the buyer is credited by the same amount. This creates a balance where the seller's closing proceeds decrease by the amount they are contributing, while the buyer's costs decrease correspondingly. Thus, the correct recording to reflect this transaction on the settlement sheet is a debit to the seller and a credit to the buyer. This method ensures clarity in the financial accounting of the transaction, accurately representing the financial responsibilities of both parties.

When a seller agrees to pay a portion of the buyer's closing costs, this transaction is reflected on the settlement sheet through a debit and credit system. In this context, the seller's contribution to the closing costs is considered a cost that reduces the overall amount the seller receives from the sale. As a result, the seller is debited for the amount they are paying towards the closing costs.

Conversely, since the buyer benefits from this contribution (the buyer effectively pays less out-of-pocket at closing), the buyer is credited by the same amount. This creates a balance where the seller's closing proceeds decrease by the amount they are contributing, while the buyer's costs decrease correspondingly.

Thus, the correct recording to reflect this transaction on the settlement sheet is a debit to the seller and a credit to the buyer. This method ensures clarity in the financial accounting of the transaction, accurately representing the financial responsibilities of both parties.