- Official section
- National XI.C: Prorations for Tax and Other Items
- Broker weight
- A named skill within 7% of the national portion
- Expected scored items
- The current PSI broker outline assigns about 7 of 100 scored national items to Real Estate Math
Closing math guide
Real estate proration from time share to ledger entry
Proration has three separate jobs: choose the money base, count the time, and decide who owes whom. Do them in that order. Students who chase debit and credit labels before they know who paid usually reverse a perfectly correct dollar calculation.
Last updated: August 1, 2026
What calculation do you need to make?
Short answer: Prorated share equals the full-period amount divided by the stated time units, multiplied by the responsible units. For an accrued seller-period expense the buyer will pay later, use a seller debit and buyer credit. For a seller-prepaid expense benefiting the buyer, use a seller credit and buyer debit. Rent the seller collected in advance for the buyer period normally creates a seller debit and buyer credit. Count closing day for the party named in the question. Use 30-day months only in a stated 360-day method; use actual days for a calendar method. Build an estimated annual base before calculating when the contract requires a percentage of the prior bill.
The current PSI outline expressly names prorations for tax and other items. Actual Illinois settlement entries follow the contract, tax-bill status, local practice, lender instructions, title records, lease terms, applicable landlord law, and any reproration agreement. A prior bill can be an estimate rather than the final liability. The federal Closing Disclosure shows charges and adjustments but does not replace the parties' contract. Use the amount, method, period, closing-day owner, and payment status stated in the exam question. Sources were checked through August 1, 2026.
How do you solve real estate prorations?
- Box the item, full-period amount, period covered, proration method, closing date, and owner of closing day.
- Classify the item as accrued expense, prepaid expense, accrued income, prepaid income, or transferred liability.
- Build any adjusted annual base, such as 105% of the prior tax bill, before finding a unit rate.
- Divide the full-period amount by the stated months, 360 days, 365 days, 366 days, or actual period units.
- Count the responsible units visibly and multiply them by the unrounded unit rate.
- Ask who paid or collected, who benefited or earned, and who will pay or collect after closing.
- Enter matching buyer and seller debits or credits without counting the same item twice.
- Reconcile the party shares to the full amount and round only as the question directs.
- Situation
- Unpaid seller-period expense
- Normal entry
- Seller debit, buyer credit
- Reason
- Buyer will pay seller share
- Situation
- Seller prepaid buyer-period expense
- Normal entry
- Seller credit, buyer debit
- Reason
- Buyer reimburses seller
- Situation
- Seller-period income buyer will collect
- Normal entry
- Seller credit, buyer debit
- Reason
- Buyer passes earned income back
- Situation
- Seller collected buyer-period income
- Normal entry
- Seller debit, buyer credit
- Reason
- Seller passes unearned income forward
- Situation
- Daily rate
- Normal entry
- Full-period amount / stated days
- Reason
- Use one convention
- Situation
- Prorated share
- Normal entry
- Unit rate x responsible units
- Reason
- Count closing day correctly
- Situation
- Estimated annual base
- Normal entry
- Prior amount x stated factor
- Reason
- Adjust before daily rate
- Situation
- Buyer owns closing day
- Normal entry
- Seller ends day before
- Reason
- Exclude closing date from seller
- Situation
- Seller owns closing day
- Normal entry
- Seller includes closing date
- Reason
- One extra seller day
- Situation
- Transferred security deposit
- Normal entry
- Seller debit, buyer credit
- Reason
- Liability moves to buyer
Can you follow the calculation from facts to answer?
Prorate unpaid taxes with a 365-day year
Scenario: Annual property taxes are $8,760. The problem uses 365 days and charges the seller with 150 days. The buyer will pay the bill later.
- $8,760 / 365 = $24 per day.
- $24 x 150 seller days = $3,600.
- Because the buyer will later pay the seller-period expense, debit seller and credit buyer.
Answer: The $3,600 proration is a seller debit and buyer credit.
Use a 360-day tax method
Scenario: A stated annual expense is $7,200. Under a 360-day method, the seller is charged for four 30-day months and 12 additional days.
- Daily rate is $7,200 / 360 = $20.
- Seller time is (4 x 30) + 12 = 132 days.
- $20 x 132 = $2,640.
Answer: The seller's share is $2,640 before assigning direction from payment status.
Reimburse a prepaid association expense
Scenario: The seller paid $1,200 of association dues for the calendar year. Closing is October 1, the buyer owns closing day, and the problem prorates by whole months.
- Monthly dues are $1,200 / 12 = $100.
- The buyer owns October, November, and December, or three months, worth $300.
- The seller already paid for those buyer months, so the buyer reimburses the seller.
Answer: Enter a $300 seller credit and $300 buyer debit.
Transfer rent received in advance
Scenario: The seller collected $3,000 rent for a 30-day month. Closing occurs after 12 seller days, and the buyer owns the remaining 18 days.
- Daily rent is $3,000 / 30 = $100.
- Buyer-period rent is $100 x 18 = $1,800.
- The seller holds rent earned during buyer ownership and owes it to the buyer.
Answer: Enter a $1,800 seller debit and $1,800 buyer credit.
Adjust the prior tax bill before prorating
Scenario: The contract requires proration at 105% of the prior $7,200 bill. It uses a 360-day year and 100 seller days.
- Estimated annual base is $7,200 x 1.05 = $7,560.
- Daily rate is $7,560 / 360 = $21.
- Seller share is $21 x 100 = $2,100.
Answer: The estimated seller tax share is $2,100.
Separate deposit transfer from rent
Scenario: At closing the seller holds a $2,500 refundable tenant security deposit and has also collected $1,800 of rent attributable to the buyer's ownership period.
- The $2,500 deposit is a tenant-related liability, not earned rent.
- The $1,800 is buyer-period income already collected by the seller.
- Both amounts move economically to the buyer, but they retain different legal and accounting labels.
Answer: Credit buyer and debit seller $4,300 total, recorded as separate $2,500 deposit and $1,800 rent entries.
Which math errors cost the most points?
- Trap
- Every proration is a seller debit and buyer credit.
- Correction
- Prepaid seller expenses benefiting the buyer reverse that direction.
- Trap
- Assign debits and credits before identifying payment status.
- Correction
- First decide who paid or collected and which party owns the relevant period.
- Trap
- Use 360 days for every closing problem.
- Correction
- Use the stated 360-day, 365-day, leap-year, monthly, or calendar method.
- Trap
- Treat actual February as 28 days in a 360-day method.
- Correction
- A stated 360-day method treats every month as 30 days.
- Trap
- Include closing day for both buyer and seller.
- Correction
- Assign it to the party specified so the day is counted once.
- Trap
- Apply 105% after calculating the seller's share.
- Correction
- Build the adjusted annual base first, then calculate its unit and party shares.
- Trap
- Round a repeating daily rate before multiplying.
- Correction
- Retain full precision and round the final proration unless instructed otherwise.
- Trap
- Treat rent collected in advance as entirely the seller's income.
- Correction
- Transfer the portion attributable to buyer ownership through a buyer credit.
- Trap
- Treat a refundable security deposit as rent.
- Correction
- The deposit is a tenant-related liability and should be transferred separately.
- Trap
- Call an estimated tax proration the final tax bill.
- Correction
- An estimate can be subject to the contract and a later reproration.
- Trap
- Use the bill due date as the ownership period automatically.
- Correction
- Identify the tax or service period the bill covers, which can differ from its payment date.
- Trap
- Count the same proration as a fee and an adjustment.
- Correction
- Record each economic item once on each party's ledger.
Can you solve these original problems?
These questions are original study items aligned to the published outline. They are not copied, recalled, or predicted PSI questions.
1. An annual expense is $7,300. Using 365 days and 90 responsible days, what is the prorated share?
- $1,800
- $2,000
- $1,825
- $657
Show answer and explanation
Answer: $1,800
$7,300 / 365 = $20 per day, and $20 x 90 = $1,800.
2. The seller prepaid an expense that benefits the buyer after closing. What is the normal direction?
- Seller credit and buyer debit
- Seller debit and buyer credit
- Debit both parties
- Credit both parties
Show answer and explanation
Answer: Seller credit and buyer debit
The buyer reimburses the seller for the buyer-period benefit already paid by the seller.
3. A prior $8,000 tax bill is prorated at 105%. What annual base should be used before counting days?
- $8,400
- $8,000
- $8,105
- $7,619.05
Show answer and explanation
Answer: $8,400
$8,000 x 1.05 = $8,400.
4. The seller collected rent for a period the buyer will own. What is the normal direction for the buyer-period amount?
- Seller debit and buyer credit
- Seller credit and buyer debit
- No adjustment
- Buyer debit only
Show answer and explanation
Answer: Seller debit and buyer credit
The seller passes the buyer-period income already collected to the buyer.
5. Under a 360-day method, how many days are in four full months plus 15 days?
- 135 days
- 137 days
- 120 days
- 145 days
Show answer and explanation
Answer: 135 days
Four 30-day months equal 120 days; add 15 to get 135.
Which numbers and formulas are easy to confuse?
- Terms
- Accrued expense vs. prepaid expense
- Difference
- An accrued expense was incurred but remains unpaid. A prepaid expense was paid before the benefiting period ended.
- Question cue
- Future payment versus prior payment.
- Terms
- Accrued income vs. prepaid income
- Difference
- Accrued income was earned but not collected. Prepaid income was collected before the full earning period.
- Question cue
- Earned first versus collected first.
- Terms
- Dollar share vs. ledger direction
- Difference
- The dollar share measures time allocation. Ledger direction decides which party reimburses the other.
- Question cue
- How much versus who owes whom.
- Terms
- 360-day vs. 365-day method
- Difference
- A 360-day method uses twelve 30-day months. A 365-day method uses a 365 denominator and the required actual-day count.
- Question cue
- Synthetic year versus ordinary calendar denominator.
- Terms
- 365-day vs. leap-year method
- Difference
- An ordinary calendar year has 365 days. A leap year has 366 and includes February 29.
- Question cue
- Ordinary year versus leap year.
- Terms
- Tax bill vs. proration base
- Difference
- The last tax bill is an official historical amount. The contract may adjust it by a stated percentage to create an estimated base.
- Question cue
- Known bill versus agreed estimate.
- Terms
- Proration vs. reproration
- Difference
- Proration makes the closing allocation. Reproration revisits an estimate after the actual amount becomes known.
- Question cue
- Closing estimate versus later true-up.
- Terms
- Rent proration vs. security-deposit transfer
- Difference
- Rent is income allocated to an earning period. A refundable deposit remains a tenant-related liability until lawfully applied or returned.
- Question cue
- Earned income versus held funds.
- Terms
- Buyer credit vs. buyer debit
- Difference
- A buyer credit reduces buyer cash needed. A buyer debit increases the buyer's settlement obligation.
- Question cue
- Money toward buyer versus money due from buyer.
- Terms
- Paid item vs. responsible party
- Difference
- The party who wrote the check is not always the party economically responsible for the entire period.
- Question cue
- Payment timing versus ownership share.
What does the outline expect you to calculate?
- Topic
- Purpose of proration
- What to know
- Ownership period, benefit period, income, expense, allocation, reimbursement, accrued item, prepaid item, collected income, unpaid income, settlement adjustment, and fair share
- Best exam move
- Identify which party owned or benefited during the period before calculating the adjustment.
- Topic
- Full-period amount
- What to know
- Annual tax, annual premium, monthly rent, annual association fee, quarterly charge, fuel amount, water bill, assessment, estimated amount, prior bill, contract factor, and proration base
- Best exam move
- Build the exact full-period base required before dividing it into time units.
- Topic
- Accrued expenses
- What to know
- Unpaid property tax, utility used, association charge incurred, interest owed, seller ownership, buyer future payment, seller debit, buyer credit, reimbursement, and liability
- Best exam move
- When the buyer will pay the seller's incurred share later, transfer that amount from seller to buyer at closing.
- Topic
- Prepaid expenses
- What to know
- Prepaid insurance, prepaid association dues, prepaid tax, fuel supply, service contract, seller prior payment, buyer future benefit, seller credit, buyer debit, and reimbursement
- Best exam move
- Give the seller credit for the buyer-period benefit the seller already funded.
- Topic
- Accrued income
- What to know
- Rent earned but uncollected, tenant arrears, seller ownership period, buyer later collection, seller credit, buyer debit, collectability, lease, and transaction instruction
- Best exam move
- If the buyer will collect income earned during seller ownership and the problem treats it as collectible, reimburse the seller.
- Topic
- Prepaid income
- What to know
- Rent received in advance, tenant payment, buyer ownership period, seller collection, unearned portion, seller debit, buyer credit, monthly rent, daily rent, and lease period
- Best exam move
- Transfer the buyer-period income already held by the seller to the buyer.
- Topic
- Property-tax estimate
- What to know
- Prior bill, current estimate, 100%, 105%, 110%, contract factor, new construction, reassessment, exemption, seller occupancy, annual base, and reproration
- Best exam move
- Multiply the prior bill by the stated factor before finding any daily rate.
- Topic
- Illinois property-tax direction
- What to know
- Outstanding bill, seller responsibility, buyer future payment, seller period, buyer credit, seller debit, closing date, contract terms, county treasurer, and reproration
- Best exam move
- For an unpaid seller-period share the buyer will pay, debit the seller and credit the buyer.
- Topic
- Monthly proration
- What to know
- Full month, partial month, monthly rent, monthly dues, daily rent, month length, closing date, buyer days, seller days, and exact instruction
- Best exam move
- Use whole months only when allowed, then calculate any partial month under the stated convention.
- Topic
- 360-day method
- What to know
- Banker's year, statutory year, twelve months, 30-day month, annual amount, daily rate, month number, synthetic day count, February, and instruction
- Best exam move
- Divide by 360 and treat each month as 30 days only when the problem expressly chooses this method.
- Topic
- 365-day method
- What to know
- Annual amount, 365 denominator, daily rate, elapsed days, ownership days, ordinary year, closing day, inclusive count, and exact calculation
- Best exam move
- Divide by 365, count the required days, and retain precision until the final amount.
- Topic
- Leap-year method
- What to know
- 366 days, February 29, leap year, annual amount, daily rate, calendar count, closing date, denominator, and problem instruction
- Best exam move
- Use 366 only when the relevant year and stated calendar convention require it.
- Topic
- Calendar-day counting
- What to know
- January 31, February 28 or 29, April 30, June 30, September 30, November 30, full months, partial month, closing day, and cumulative days
- Best exam move
- Write each month subtotal so the responsible period and any off-by-one choice remain visible.
- Topic
- Closing-day allocation
- What to know
- Buyer owns closing day, seller owns closing day, through day before closing, include closing date, possession, proration date, contract, and one-day difference
- Best exam move
- Write B or S on the closing date before counting either party's days.
- Topic
- Debit and credit direction
- What to know
- Buyer debit, buyer credit, seller debit, seller credit, cash needed, seller proceeds, matching entry, settlement ledger, reimbursement, and economic direction
- Best exam move
- Name who paid, who benefited, and who will pay before assigning accounting labels.
- Topic
- Security-deposit liability
- What to know
- Tenant deposit, refundable amount, accrued interest, lawful deduction, transfer, buyer-held liability, seller debit, buyer credit, notice, records, and rent distinction
- Best exam move
- Treat transferred deposit money as a liability, not rent earned during an ownership period.
- Topic
- Closing Disclosure
- What to know
- Summaries of transactions, adjustments for items paid by seller in advance, adjustments for items unpaid by seller, due from buyer, due to seller, borrower credit, seller credit, and final cash
- Best exam move
- Read the economic direction behind the line instead of assuming the word credit always helps the same party.
- Topic
- Precision and reconciliation
- What to know
- Daily rate, repeating decimal, full precision, cents, final rounding, total period, buyer share, seller share, sum check, sign, and answer choice
- Best exam move
- Confirm that both party shares add to the full-period amount and round only at the directed stage.
How should you drill this calculation?
- Session
- Session 1
- Focus
- Classify proration stories
- Proof you are ready
- Sort 40 facts into accrued expense, prepaid expense, accrued income, prepaid income, or transferred liability.
- Session
- Session 2
- Focus
- Count time accurately
- Proof you are ready
- Count 20 seller and buyer periods under explicit closing-day, monthly, calendar, and leap-year instructions.
- Session
- Session 3
- Focus
- Use every day method
- Proof you are ready
- Solve ten 360-day, ten 365-day, and ten calendar-day prorations with full-precision checks.
- Session
- Session 4
- Focus
- Assign ledger direction
- Proof you are ready
- Enter matching buyer and seller debits or credits for 25 paid, unpaid, collected, and uncollected items.
- Session
- Session 5
- Focus
- Handle estimates and rental items
- Proof you are ready
- Build adjusted tax bases, rent allocations, deposit transfers, and reproration explanations in 20 scenarios.
- Session
- Session 6
- Focus
- Complete a mixed proration set
- Proof you are ready
- Score at least 90% and justify each answer by item class, base, time method, day owner, responsible share, payment status, and direction.
Do not count recognition as mastery. Close the notes and explain the rule, apply it to a new fact pattern, and identify why each distractor fails.
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Questions students ask about Real Estate Proration Formula and Examples
What is the real estate proration formula?
Prorated share equals the full-period amount divided by the number of units in that period, multiplied by the responsible units. Units can be months or days. Use the 360-day, 365-day, 366-day, or actual-calendar method stated in the problem.
What is an accrued item at closing?
An accrued item has been earned or incurred but has not yet been paid or collected for the relevant period. When the buyer will later pay an expense attributable to the seller's ownership, the seller normally receives a debit and the buyer a matching credit, subject to the contract and problem facts.
What is a prepaid item at closing?
A prepaid item was paid before closing for a period extending beyond closing. If the seller paid an expense that benefits the buyer after closing, the buyer normally reimburses the seller through a buyer debit and seller credit for the buyer period.
Are Illinois property taxes prorated as accrued expenses?
Illinois closing questions commonly treat property tax as accrued because a bill for an ownership period is paid later. IDOR says an existing-home seller generally pays outstanding bills and provides a buyer credit for the seller's ownership period under the contract. Use the bill status and contract method stated in the problem.
Should a proration use 360 or 365 days?
Use the method stated. A 360-day method uses twelve 30-day months. A 365-day method divides the annual amount by 365 and then uses the required day count. A leap-year problem may use 366. Do not switch conventions halfway through the calculation.
Who owns the closing day in a proration problem?
The contract or question decides. If the buyer owns closing day, seller time ends the day before. If the seller owns closing day, include it in seller time. Write that assignment before counting to avoid an off-by-one error.
How is rent received in advance prorated?
If the seller already collected rent covering the buyer's post-closing ownership period, the seller owes that portion to the buyer. The adjustment is normally a seller debit and buyer credit. Calculate the buyer-period rent from the exact monthly or daily convention supplied.
Is a tenant security deposit rental income to prorate?
No. A refundable security deposit is generally a liability held for the tenant, not rent earned by the seller. At transfer, the applicable deposit and required records or notices follow governing law and the transaction. Keep a deposit transfer separate from a rent proration.
What is a tax reproration agreement?
It is an agreement to revisit an estimated closing allocation after the actual tax bill becomes available. IDOR notes that new-construction transactions often use a reproration agreement. The initial estimate and later true-up are separate calculations.
Are these official Illinois broker exam questions?
No. They are original calculations aligned to the PSI broker outline effective June 24, 2026. Current Illinois Department of Revenue materials, federal Closing Disclosure rules, and Illinois law were checked through August 1, 2026.
Primary sources
- PSI Illinois Candidate Information Booklet dated June 24, 2026
- Illinois Department of Revenue, current seller property-tax responsibility at closing
- Illinois Department of Revenue, FY 2026 Property Tax Study
- 12 CFR 1026.38, current Closing Disclosure transaction-summary requirements
- Consumer Financial Protection Bureau, current guide to federal mortgage disclosure forms
- 765 ILCS 710, current Illinois Security Deposit Return Act
The current official outline controls the tested scope. Statutes, regulations, and official agency materials control when a general study rule and a jurisdiction-specific rule differ.
Editorial status
Checked against primary sources
The Pass Illinois editorial team last checked this guide on August 1, 2026. Every practice question is an original study item, and the source links above let you verify the rules that support the lesson.