Question 18

A debit on a seller's closing settlement statement represents a charge against the seller's proceeds.

A debit on a seller's closing settlement statement indicates a reduction in the funds the seller receives from the transaction, thus representing a charge against their proceeds.

A) It must be balanced by a buyer's credit.

This statement is incorrect because while debits on a closing statement may need to be balanced by credits, it is not specific to a buyer's credit. A debit to the seller may be balanced by either buyer or seller credits, depending on the specific transaction details.

B) It must be balanced by a seller's credit.

This statement is also incorrect. Although a debit may be offset by a seller's credit, it is not a requirement that a debit on the seller's statement must be balanced specifically by a seller's credit; it could also be offset by a buyer's credit.

C) It represents a charge against the seller's proceeds.

This statement is correct. A debit listed on the seller's closing settlement statement directly decreases the amount of money the seller receives from the transaction, thus confirming it as a charge against their proceeds.

D) It cannot be used to determine the amount due to the seller.

This statement is incorrect. The debit on a seller's closing settlement statement is essential for determining the final amount due to the seller, as it shows deductions from the total proceeds.

Conclusion

The correct answer is C, as it accurately describes the nature of a debit on a seller's closing settlement statement as a charge that reduces their proceeds from the sale. Other options either misinterpret the relationship of debits and credits or incorrectly assert the function of a debit in determining the seller's net amount. Thus, only option C aligns with the established understanding of closing settlement statements.