Final answer:
The incorrect statement is that a seller receives a credit for an expense paid in advance. In accounting terms, a prepaid expense by the seller is actually recorded as a debit, because it is considered an asset. Therefore, the most appropriate option is C.
Step-by-step explanation:
The statements provided seem to relate to accounting and handling of prepaid expenses or income in real estate transactions. However, the concept of credit and debit mentioned in the question can be confusing as it can refer to different contexts, such as accounting entries or credit card transactions. In the context of accounting, a credit increases liabilities or equity or decreases an asset or expense. Conversely, a debit increases assets or expenses or decreases liabilities or equity.
Looking at the statements given:
- For an expense a seller paid in advance, the seller receives a debit because it's an asset.
- For an expense a buyer pays in advance, the seller receives a credit because it's a liability from the seller's perspective.
- For an expense a buyer pays outside of closing, a buyer receives a debit.
- For income a seller receives in advance, the seller receives a credit, because it's unearned revenue and thus a liability.
Therefore, the incorrect statement is:
'For an expense a seller paid in advance, the seller receives a credit.'
That statement is incorrect because if the seller pays an expense in advance, it is recorded as a prepaid expense, an asset, which should be a debit to the seller's account, not a credit.