The investor can also, by sending you a memo to this effect, credit a portion of excess equity to a separate bucket called a special memorandum account (SMA), which functions like a line of credit.

Whenever he sells a security, 50% of the proceeds can be marked for SMA. Let's say he sells another $1,000 in stock:

$4,000 Long Market Value
($1,000) Debit Balance
$3,000 Credit Balance
$500 SMA


Both the debit and the equity change by $1,000. SMA is enhanced - from $0 in this case - by 50% of that. This is the amount the client has available to purchase new securities or withdraw in cash. If he chooses the latter and writes a check against his margin account for $100, this is what it will look like:
$4,000 Long Market Value
($1,100) Debit Balance
$2,900 Credit Balance
$400 Excess Equity



Short Sales

Related Articles
  1. Investing

    What Does Debit Mean?

    Debit is an accounting term used to refer to the left side of an accounting journal entry. Each debit must be offset by an equal credit entry.
  2. Investing

    How to Make a Closing Entry

    Observe the following procedure for making closing entries.
  3. Investing

    What's a Debit Note?

    A debit note is a document used by a seller to inform a purchaser of a dollar amount owed. As the name indicates, it is a note from the seller that a debit has been made to the purchaser’s account. ...
  4. Personal Finance

    10 Reasons To Use Your Credit Card

    There are several benefits to paying with credit instead of debit, if you use a credit card responsibly.
  5. Personal Finance

    Credit vs. Debit Cards: Which is Better?

    Be strategic about the card you choose
  6. Personal Finance

    How To Live Without A Credit Card

    Debit cards are more widely accepted and provide better fraud protection than in the past.
  7. Investing

    Understanding Credit

    Credit has three common meanings in the financial world.
Frequently Asked Questions
  1. What are the Differences Between Ex Works (EXW) and Free On Board (FOB)?

    Learn about Ex Works and Free on Board, the main difference between these Incoterms, and the responsibilities of buyers and ...
  2. What are Common Examples of Monopolistic Markets?

    Discover what causes real instances of market monopoly, how it persists and where monopoly privilege is most common in the ...
  3. What is the gold standard?

    The gold standard is a monetary system where a country's currency or paper money has a value directly linked to gold, but ...
  4. What's the most expensive stock of all time?

    The most expensive publicly traded stock of all time is Warren Buffett’s Berkshire Hathaway.
Trading Center