Proration Practice Items and Method
Whether a year is treated as 365 days or twelve thirty-day months, whether the charge is billed before or after the period it covers, and which party owns the day of closing are all conventions set by jurisdiction or by the contract. Exam items state the convention they want. When one is silent, read the stem again before assuming.
Every proration item on a licensing exam asks one question in two halves: how much of a recurring charge belongs to each side, and which side of the settlement statement each half lands on. Candidates lose points on the second half far more often than the first.
This page gives you a fixed procedure, eight original items worked end to end, and a short way of labeling your errors so that a wrong answer tells you what to practice instead of just lowering your score.
The Four Steps, In Order
Run these in sequence on every item. Skipping straight to arithmetic is what produces a correct figure entered against the wrong party.
Fix the period and the total. Name the span the charge covers and the dollar amount that covers it. Six months of dues and a full year of tax are different denominators.
Reduce to a unit rate. Divide the total by the number of days or months in the period, using whichever day-count convention the item specifies. Keep the unrounded figure until the final multiplication.
Count the units on each side of the closing date. Decide first whether the closing day itself belongs to the seller or the buyer, then count. An off-by-one here is the single most common arithmetic slip on this topic.
Assign debit and credit. Ask who has already paid and who has already used. The party that consumed something it has not paid for is debited; the party that paid for something it will not use is credited.
Billed Behind Versus Billed Ahead
The direction of the entry follows the billing cycle, and nothing else. When a charge is billed after the period it covers, the seller occupied the property for months nobody has paid for yet. The buyer will receive that bill and pay all of it, so the seller hands over its share at settlement: a debit to the seller and a matching credit to the buyer.
When a charge is billed ahead of the period, the situation reverses. The seller has already paid through a date beyond closing and is walking away from coverage it purchased. The buyer reimburses the unused remainder, which is a credit to the seller and a debit to the buyer.
The amount is identical either way, which is what makes this worth practicing separately. A candidate who computes the split perfectly and reverses the direction gets no partial credit, and on a multiple-choice item the reversed figure is usually one of the distractors sitting right there.
One structural point holds regardless of direction: prorations are paired entries. Whatever one party is debited, the other is credited in the same amount, because the money is being reallocated between them rather than paid to a third party. If your two figures do not mirror each other, something upstream is wrong.
Eight Worked Items
Written for this page and original to it. None of these is taken from a licensing examination. Work each one before reading the solution, and note which of the four steps failed whenever you miss.
Question 1
Annual tax in the item is $7,300, billed after the period it covers. Closing falls on the ninetieth day of the calendar year and the seller owns the day of closing. Use a 365-day year. What is the entry?
Unit rate is 7,300 divided by 365, or $20 per day. The seller held 90 days, so the seller's share is 90 times 20, or $1,800. Because the bill is issued behind the period, that $1,800 is debited to the seller and credited to the buyer.
Question 2
The same $7,300 annual charge, same ninetieth-day closing, but the item states the buyer owns the day of closing. What changes?
Only the count. The seller now holds 89 days, making the share 89 times 20, or $1,780, and the buyer picks up the day. Direction is unchanged: still a debit to the seller and a credit to the buyer. The $20 gap between this answer and the previous one is exactly the sort of distractor an item writer includes.
Question 3
An association in the item bills $1,200 for a six-month period, paid in full at the start. Closing occurs two months into that period on a monthly basis. What is the entry?
Monthly rate is 1,200 divided by 6, or $200. The seller used two months, worth $400, leaving four months of coverage worth $800 that the seller paid for and will not use. Because the charge was billed ahead, the seller is credited $800 and the buyer is debited $800.
Question 4
An item gives a $5,400 annual assessment billed ahead, a closing on the last day of the seventh month, and directs you to use twelve thirty-day months. Compute both sides.
Under a thirty-day-month convention the year is 360 days and the daily rate is 5,400 divided by 360, or $15. Seven full months is 210 days, so the seller's use comes to $3,150 and the remaining 150 days come to $2,250. Paid ahead means the buyer is debited $2,250 and the seller is credited the same $2,250. Notice the two pieces sum back to $5,400.
Question 5
A stem lists the purchase price, the loan amount, the commission rate, the annual tax and the closing date, then asks only for the tax proration. Which figures do you use?
The annual tax and the closing date. Price, loan and commission belong to other computations in the same transaction and appear here to see whether you reach for a number simply because it was offered. Identify the charge being prorated first, then pull only the figures that describe its period and amount.
Question 6
You compute a seller share of $1,800 on a $7,300 annual charge for a closing near the start of the fourth month. How do you check it in a few seconds without redoing the division?
Test the proportion. Roughly a quarter of the year has elapsed, so the seller's share should sit near a quarter of $7,300, which is about $1,825. A result of $1,800 is in range. Answers like $5,500 or $180 fail this check instantly, which catches decimal slips and reversed subtractions before you commit.
Question 7
An item describes water service billed after use, states that the seller left a balance covering the first eleven days of a thirty-day cycle at $90 for the cycle, and asks for the buyer's position at settlement.
Daily rate is 90 divided by 30, or $3. The seller consumed 11 days, worth $33, and the buyer will receive and pay the full $90 bill. So the buyer is credited $33 and the seller is debited $33. The buyer's own 19 days, worth $57, are simply the buyer's own expense and are not prorated to anyone.
Question 8
You keep arriving at the right dollar amount and putting it on the wrong line. What practice fixes that specifically?
Stop computing for a session. Take a stack of stems and answer only two questions for each: was this billed ahead or behind, and therefore who is debited. No arithmetic at all. Direction is a separate skill from division, and drilling it alone is faster than hoping full problems eventually correct it.
Label Your Misses Before You Redo Them
A wrong proration answer is useful only if you can say which step produced it. There are four candidates, and they call for completely different practice.
A period error means you used the wrong span or the wrong total, usually by treating a partial-year billing as an annual one. A unit-rate error means the division was wrong or you applied a day-count convention the item did not ask for. A count error means the span between dates is off, nearly always by one day at the closing boundary. A direction error means the arithmetic was sound and the entry went to the wrong party.
Write the label next to each miss as you review. After a dozen items the pattern is obvious, and it is almost always one category rather than four. Redoing random problems spreads your effort evenly across problems you have already solved.
Short sets work better than long ones here. Six items with every miss labeled will move your accuracy further than forty items graded and forgotten, because the point is to retire one category at a time.
Practical Questions About Proration Items
Are the items on this page taken from a real licensing exam?
No. They were written for this page to teach the procedure. No licensing exam releases its item pool, and anything advertised as actual exam content should be treated as either invented or improperly obtained.
Should I memorize a single formula?
A formula covers one shape of problem. The four-step procedure covers all of them, because the steps stay the same whether the charge is annual or quarterly, billed ahead or behind, counted in days or months. Memorize the sequence and let the item supply the specifics.
How do I know whether to use a 365-day or a 360-day year?
The item tells you, usually in the last sentence of the stem. Where it does not, the phrasing generally signals it: a reference to thirty-day months or banker's figures points to a 360-day year, while exact calendar dates point to actual days. Local practice varies, so confirm your own jurisdiction's convention separately from exam practice.
Do prorations only show up in the math portion?
No. They also appear as settlement-statement questions that test direction without any computation, as closing-procedure questions about who is responsible for which period, and as fact-pattern items where the proration is one detail among several. The direction skill carries across all of them.
What should I work on once these feel routine?
Move to the settlement statement as a whole, so that proration entries appear alongside commission, loan payoff and recording costs rather than in isolation. Mixed timed practice is where you find out whether the procedure holds up when it is not announced in advance.
Where to go next: Related Pages
Pay once, study your state, sit the exam ready
One state, $79, no subscription. The free diagnostic shows where you stand before you pay.
Access opens immediately after checkout, and every purchase carries a 30-day money-back guarantee.