What is the formula for equity in a long margin account? A

Accounting Dec 16, 2020

What is the formula for equity in a long margin account?

A. Long Market Value + Debit = Equity

B. Long Market Value - Debit = Equity

C. Long Market Value + Credit = Equity

D. Long Market Value - Credit = Equity

Expert Solution

The answer is B. Long Market Value - Debit = Equity.

The word debit is synonymous with borrowed funds (debt), and market value is synonymous with the asset. Holistically, an investor's asset less the funds the borrowed to buy an asset equals his equity in the investment.

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