Sales price is a debit to the ______ and a credit to the ______.

• A. Debit to the Buyer; Credit to the Seller
• B. Debit to the Seller; Credit to the Buyer
• C. Debit to the Buyer; Credit to the Buyer
• D. Debit to the Seller; Credit to the Seller

Answer: (A)

When you look at a closing statement for a real estate deal, the flow of money is shown from two perspectives: what the buyer must pay and what the seller will receive. The sales price represents the amount the buyer is charged at closing, so it is recorded as a debit on the buyer’s side. It represents the funds the seller will receive, so it is recorded as a credit on the seller’s side. This mirrors the actual transfer of money: the buyer pays, the seller receives.

So the sales price is a debit to the Buyer and a credit to the Seller. It wouldn’t make sense to debit the seller for the price or to credit the buyer for paying the price, because that would imply the opposite of the actual cash flow.