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

    What's a Trial Balance?

    A trial balance is a worksheet listing the debit or credit balances of all the ledger accounts for an entity. Under accounting theory, the total of all the debits must equal the total of all ...
  3. Personal Finance

    What is an Account Balance?

    An account balance represents the total amount of money in a financial account at any given moment.
  4. Personal Finance

    The Downsides Of Debit Cards

    The convenience of debit cards makes them a popular method of payment, but here are some downsides to consider.
  5. Personal Finance

    Debit Cards: Why They're Not As Safe As You Think

    Ditching your credit card can be a smart move, but debit isn't yet an equal alternative.
  6. Investing

    How to Make a Closing Entry

    Observe the following procedure for making closing entries.
  7. Personal Finance

    How Debit Cards Work

    Unlike credit cards, debit cards rely only on the funds available in the user’s account, so they do not let users borrow on credit. They frequently come with purchase limits, and using one at ...
  8. 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. ...
  9. Trading

    Understanding Forex Rollover Credits And Debits

    Forex trades are subject to receiving interest or being debited interest if positions are held overnight.
  10. Personal Finance

    How To Keep Your Debit Card Transactions Safe

    Debit card use has become more popular than ever, but not every consumer knows what they need to do to make sure they keep their debit card safe.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center