California Real Estate Practice Exam

Which of the following is considered a "debit" to the buyer?

1. Accrued interest

2. Purchase price

3. Rentals payable in advance

4. Selling expenses

The correct answer is: Accrued interest

Accrued interest is considered a "debit" to the buyer because it is an amount that the buyer must pay at closing for interest that has accumulated on a loan or other financing arrangement. In real estate transactions, accrued interest typically reflects the period from the last payment date up to the closing date. The buyer owes this amount upon purchasing the property, which is why it is categorized as a debit on the closing statement. In real estate transactions, the purchase price is generally viewed as a credit to the seller, not a debit to the buyer. Rentals payable in advance would typically be credits to the seller, as they represent funds that the seller has already received for rental periods still to come. Selling expenses are also costs associated with the seller's transaction, thus they do not impact the buyer as debits. Understanding these distinctions is essential for comprehending how financial obligations are structured in real estate transactions.