Accounting for Debt Securities and Capital Stock of Small Businesses, Study notes of Business

Download Accounting for Debt Securities and Capital Stock of Small Businesses and more Study notes Business in PDF only on Docsity! 10 06 A Effective Date: 8/3/99 Page 151 Appendix 16: Chart of Accounts for Small Business Investment Companies A. Account Numbering System. This system provides for two-digit number designations for major categories under which accounts are listed, and three-digit number designations for individual general ledger accounts. The first two digits of an individual account number refer to the major category under which the account is classified and the third digit identifies the specific account. Digits from zero through nine are used to identify specific accounts; the first deposit bank account established will be designed "100" and the second "101". Some categories encompass individual accounts in sufficient number to require assignment of more than one two-digit number to identify the category. For example, "Cash on Hand and in Banks" has been assigned category numbers "10", "11" and "12." B. Additional Accounts. Licensees may incorporate such additional accounts into their accounting system as are considered necessary. Any account may be subdivided provided that such subaccounts do not impair the integrity of the accounts set forth in the prescribed system. Subaccounts shall refer by number and title to the accounts to which they apply. C. Primary Classification of Accounts. The primary classification of accounts is as follows: Account No. Description General Ledger 100 to 299 ....... Asset and valuation accounts. 300 to 399 ....... Liability accounts. 400 to 499 ....... Capital accounts. 500 to 599 ....... Income/Gain accounts. 600 to 799 ....... Expense/Loss accounts. Memorandum Records NA-10 to NA-14 ....... Nominal assets. CL-15 to CL-17 ....... Contingent liabilities. OCS-1 ....... Options on licensee's stock. AL-1 ....... Actual (realized) losses. WI-1 ....... Worthless investments -- written off. PDA-1 ....... Preferred dividend arrearages on preferred stock. PPA-1 ....... Prioritized Payments Accumulation Account. PPE-1 ....... Prioritized Payments Earned Account. BCI-1 ....... Binding commitments from Institutional Investors. CLC-1 ....... SBA conditional leverage commitments. OCI-1 ....... Other commitments from investors. PLI-1 ....... Preferential liquidating interest of SBA. D. Detailed Chart of Accounts. The detailed chart of accounts is organized according to the primary classification of accounts and identifies the account number and title of each account. Asset and Valuation Accounts 10 - 12 -- Cash on Hand and in Banks 100 - 108 -- Bank Deposits. 110 - 112 -- Deposits in Imprest Account. 118 -- Cash Items in Process of Collection. 120 -- Petty Cash Fund. 13 -- Invested Idle Funds 130 -- U.S. Government Obligations, Direct and Fully Guaranteed. 131 -- Insured Savings Accounts. 10 06 A Effective Date: 8/3/99 Page 152 135 - 137 -- Time Certificates of Deposit. 138 -- Repurchase Agreements with Insured Institutions. 139 -- Other Investments in Insured Institutions. 14 -- Receivables 140 -- Notes Receivable. 141 -- Accounts Receivable. 142 -- Allowance for Uncollectible Notes and Accounts Receivable. 143 -- Accrued Interest Receivable. 144 -- Allowance for Uncollectible Interest Receivable. 145 -- Dividends Receivable. 146 -- Receivables from Parent. 15 -- Current Maturities and Other Current Assets 150 -- Current Maturities of Portfolio Securities. 152 -- Current Maturities of Assets Acquired in Liquidation of Portfolio Securities. 153 -- Current Maturities of Operating Concerns Acquired. 154 -- Current Maturities of Other Securities. 156 -- Other Current Assets. 16 -- Investment in Section 301(d) Licensee 160 -- Investment in Section 301(d) Licensee. 17 -- Loans to Small Businesses 170 -- Loans. 172 -- Depreciation of Loans. 173 -- Unearned Discount, Fees, and Other Charges on Loans. 18 -- Debt Securities of Small Businesses 180 -- Debt Securities with Stock Purchase Warrants or Options, and/or Conversion Features. 184 -- Debt Securities Divested of Stock Rights. 186 -- Appreciation of Debt Securities. 187 -- Depreciation of Debt Securities. 188 -- Unearned Discount, Fees, and Other Charges on Debt Securities. 19 -- Equity Interests of Small Businesses 190 -- Capital Stock of Small Businesses, with Stock Purchase Warrants or Options, and/or Conversion Features. 191 -- Capital Stock of Small Businesses -- Other. 192 -- Appreciation of Capital Stock. 193 -- Depreciation of Capital Stock. 194 -- Equity Interests of Unincorporated Concerns. 195 -- Appreciation of Equity Interests in Unincorporated Concerns. 196 -- Depreciation of Equity Interests in Unincorporated Concerns. 197 -- Warrants, Options, and Other Stock Rights Acquired from Small Businesses. 198 -- Appreciation of Warrants, Options, and Other Stock Rights Acquired from Small Businesses. 199 -- Depreciation of Warrants, Options, and Other Stock Rights Acquired from Small Businesses. 20 -- Assets Acquired in Liquidation of Portfolio Securities 200 -- Receivables from Debtors on Sale of Assets Acquired in Liquidation of Portfolio Securities. 203 -- Depreciation in Values of Receivables from Debtors on Sale of Assets Acquired in Liquidation of Portfolio Securities. 204 -- Assets Acquired in Liquidation of Portfolio Securities. 205 -- Appreciation of Assets Acquired in Liquidation of Portfolio Securities. 206 -- Depreciation of Assets Acquired in Liquidation of Portfolio Securities. 21 -- Operating Concerns Acquired 210 -- Operating Concerns Acquired. 211 -- Appreciation of Operating Concerns Acquired. 10 06 A Effective Date: 8/3/99 Page 155 496 -- Limited Partners' Undistributed Net Realized Earnings (Loss). 497 -- Partnership Year-to-date Net Income (Loss) Income/Gain Accounts 50 -- Commitment Income 500 -- Commitment Fee Income. 51 - 52 -- Interest Income 510 -- Interest on Invested Idle Funds. 512 -- Interest on Loans. 516 -- Interest on Debt Securities. 520 -- Interest Income -- Other. 53 -- Fee Income 532 -- Management Service Fees. 534 -- Investigation and Service Fees Charged Other Lenders. 536 -- Application, Closing and Other Fees. 54 -- Dividends and Other Earnings 540 -- Dividends on Capital Stock of Small Businesses. 541 -- Sharing in Income or Revenue of Small Businesses. 57 -- Gain on Securities and Other Assets 570 -- Gain on U.S. Government Securities. 571 -- Gain on Loans. 572 -- Gain on Debt Securities. 574 -- Gain on Capital Stock of Small Businesses. 575 -- Gain on Equity Interests in Unincorporated Concerns. 576 -- Gain on Warrants, Options, and Other Stock Rights Acquired from Small Businesses. 577 -- Gain on Assets Acquired in Liquidation of Portfolio Securities. 578 -- Gain on Operating Concerns Acquired. 579 -- Gain on Other Assets. 58 -- Miscellaneous Income 582 -- Income from Assets Acquired in Liquidation of Portfolio Securities. 584 -- Other Income. Expense/Loss Accounts 60 -- Commitment Expense 600 -- Commitment Expense. 61 - 62 -- Interest Expense 610 -- Interest on Obligations Payable to/Guaranteed by SBA. 622 -- Interest on Non-SBA Obligations. 64 -- Stock Record and Other Financial Expenses 641 -- Annual Fee on Obligations Guaranteed by SBA. 642 -- Stock Record and Other Financial Expenses. 65 - 67 -- Operating Expenses 650 -- Advertising and Promotional Costs. 651 -- Appraisal and Investigation Costs. 652 -- Auditing and Examination Costs. 653 -- Communications. 654 -- Cost of Space Occupied. 655 -- Depreciation of Business Premises Owned, Furniture, and Equipment. 656 -- Amortization of Leasehold Improvements. 657 -- Directors', Stockholders' or Partners' Meetings Costs. 10 06 A Effective Date: 8/3/99 Page 156 658 -- Insurance. 659 -- Management Services Fees. 660 -- Investment Advisor Costs. 661 -- Legal Services. 663 -- Salaries. 664 -- Taxes, Excluding Income Taxes. 665 -- Travel. 670 -- Employee Benefits Expense. 672 -- Organization Costs. 673 -- Amortization of Deferred Financing Costs. 679 -- Miscellaneous Operating Expenses. 68 -- Estimated Losses on Receivables 680 -- Estimated Losses on Receivables. 70 -- Loss on Securities and Other Assets 700 -- Loss on U.S. Government Securities. 701 -- Loss on Loans. 702 -- Loss on Debt Securities. 704 -- Loss on Capital Stock of Small Businesses. 705 -- Loss on Equity Interests in Unincorporated Concerns. 706 -- Loss on Warrants, Options, and Other Stock Rights Acquired from Small Businesses. 707 -- Loss on Assets Acquired in Liquidation of Portfolio Securities. 708 -- Loss on Operating Concerns Acquired. 709 -- Loss on Other Assets. 71 -- Miscellaneous Expenses 710 -- Expense on Assets Acquired in Liquidation of Portfolio Securities. 715 -- Other Expenses 72 -- Income Taxes 720 -- Income Taxes -- Net Income. 722 -- Income Taxes -- Net Realized Gain on Investments. Memorandum Records Nominal Assets NA - 10 -- Stock Purchase Warrants or Options on Stock of Small Businesses. Contingent Liabilities CL - 15 -- Commitments Outstanding. CL - 16 -- Guarantees Outstanding. CL - 17 -- Other Contingent Liabilities. Options on Licensee's Stock OCS - 1 -- Options on Licensee's Stock. Actual Loss Experience AL - 1 -- Actual (Realized) Losses. WI - 1 -- Worthless Investments Written Off. Preferred Dividend Arrearages PDA - 1 -- Preferred Dividend Arrearages on 3 Percent Preferred Stock Sold to SBA. Prioritized Payments Accumulation Account PPA - 1 -- Prioritized Payments Accumulation Account. Prioritized Payments Earned Account PPE - 1 -- Prioritized Payments Earned Account. Binding Commitments from Institutional Investors BCI - 1 -- Binding Commitments from Institutional Investors. 10 06 A Effective Date: 8/3/99 Page 157 SBA Conditional Leverage Commitments CLC - 1 -- SBA Conditional Leverage Commitments. Other Commitments OCI - 1 -- Other Commitments from Investors. Preferential Liquidating Interest of SBA PLI - 1 -- Preferential Liquidating Interest of SBA. E. Description of Accounts. The following is a detailed description of each account. Asset and Valuation Accounts 100 - 108 -- Bank Deposits These accounts represent funds on demand deposit in a federally insured bank or savings and loan company, in accordance with 13 CFR 107.530. Debit: (a) With amount of funds deposited. Credit: (a) With amount of funds withdrawn, and charges made by bank for such items as dishonored checks, transfer of funds by wire, collection, exchange, etc. 110 - 112 -- Deposits in Imprest Account These accounts represent funds on demand deposit in imprest bank accounts to be drawn upon for the payment of operating expenses and to be reimbursed periodically from the licensee's general funds bank account. Debit: (a) With amount of funds deposited. Credit: (a) With amount of funds withdrawn. 118 -- Cash Items in Process of Collection This account represents the amount of cash items placed with banks for collection. Debit: (a) With amount of such items placed with banks for collection. Credit: (a) With amount of items collected. (b) With amount of uncollected items returned or withdrawn. 120 -- Petty Cash Fund This account represents the imprest petty cash fund maintained for the purpose of making small disbursements. Debit: (a) With amount placed in the fund when established. (b) With amount of increase in the fund. Credit: 10 06 A Effective Date: 8/3/99 Page 160 Credit: (a) With amount of such reserve established. (b) With amount of increases in such reserve. (c) With amount of recoveries on notes and accounts receivable written off. 143 -- Accrued Interest Receivable This account represents the amount of interest accrued on portfolio loans to and debt securities of small businesses, United States Government obligations, direct and fully guaranteed, notes receivable, sales contracts, and other interest-bearing amounts due from debtors, including funds placed in escrow pending the closing of financing and assets acquired in liquidation of portfolio securities as well as interest accrued on other securities. Debit: (a) With amount of interest accrued on all items covered by this account. Credit: (a) With amount of interest payments received. (b) With amount of accrued interest transferred to assets acquired in liquidation of loans and debt securities. (c) Upon disposition of interest-bearing obligations, with amount of accrued interest thereon included in this account. (d) With amount of accrued interest written off or disposed of otherwise. Note 1. -- At the option of the licensee, interest payments received in cash from debtors prior to the interest maturity date may be credited to account no. 374 -- Unapplied receipts, until the maturity date. Note 2. -- As stated in "Accounting Standards and Financial Reporting Requirements for Small Business Investment Companies", accrual of interest receivable should be discontinued with respect to a loan or debt security if the financed small business is in bankruptcy, insolvent, or if there is substantial doubt about its ability to continue as a going concern. Any interest payments received under these conditions should not be treated as interest income, but should be credited either as principal payments or as deferred income in account no. 383 -- Other deferred credits, pending determination of the appropriate accounting. In less serious situations, when the financed small business is in default more than 120 days, or the fair value of the loan or debt security is less than cost, or recovery thereon is doubtful, the accrual of interest receivable should be accompanied by an appropriate addition to the allowance for uncollectible interest receivable, or, as an alternative, the interest income should be deferred in account no. 383. (See account no. 144.) 144 -- Allowance for Uncollectible Interest Receivable This account represents the valuation reserve provided for estimated losses of accrued interest receivable, and should be maintained in an amount not less than a conservative estimate of probable losses. This valuation reserve will be adjusted as occasion demands, so that this account will reflect the best available estimate of probable losses of accrued interest receivable. Debit: (a) With amount of decreases in such reserve. (b) With amount of accrued interest receivable written off. Credit: (a) With amount of increases in such reserve established. (b) With amount of increases in such reserve. (c) With amount of recoveries of accrued interest receivable written off. 10 06 A Effective Date: 8/3/99 Page 161 145 -- Dividends Receivable This account represents cash dividends that have been declared on capital stock of small businesses but have not been distributed to stockholders. Debit: (a) With amount due the licensee of cash dividend declared. Credit: (a) With amount distributed to the licensee of the dividend declared. (See account no. 540.) Note 1. -- Stock splits are not recorded as dividends receivable or dividend income because the licensee's equity interest in the company declaring the dividend or split has not changed. Therefore, stock splits will be measured in the appropriate investment account (Account nos. 190 or 191). Note 2. -- Dividends in kind will be recorded as income at the fair market value of the securities received and will be recorded in Account no. 221, Other securities received. 146 -- Receivables from Parent This account represents receivables due licensee from its parent. Receivables due from parent will generally be from one of two sources: (1) Expenses shared pro-rata with the parent paid by the licensee, but not yet reimbursed by the parent and/or (2) licensee has a tax loss from which the parent (and/or consolidated group) have received a tax benefit. Debit: (a) With parent's share of any expense shared with the licensee which was paid by the licensee. (b) With Licensee's share of any tax benefit derived by the parent from the filing of a consolidated tax return when the licensee has a taxable loss. (c) With any other receivable due from parent arising from any other source. Credit: (a) With cash received from parent. (b) With income taxes due from licensee but paid by the parent. (This credit can arise only as an offset to a previously recorded debit to this account; if there is no such debit balance, credit account no. 341.) 150 -- Current Maturities of Portfolio Securities The account represents the principal amounts due the licensee on a cost basis of loans and debt securities of small businesses that are reasonably expected to be collected in the normal course of business in the next 12 months of operations. Debit: (a) With amount due the licensee during the current year. Credit: (a) With amount collected by the licensee. (b) With amount not considered collectible on a current basis and restored to loan or debt security accounts. (See account nos. 170, 180, and 184.) 152 -- Current Maturities of Assets Acquired in Liquidation of Portfolio Securities This account represents the current principal amounts due the licensee on a cost basis of amounts due from debtors on sale of assets acquired; or the current principal amounts of their debt instruments that are classified as assets acquired in liquidation of portfolio securities. This account represents only those amounts reasonably expected to be collected in the normal course of business in the next 12 months of operations. 10 06 A Effective Date: 8/3/99 Page 162 Debit: (a) With amount due the licensee during the current year. Credit: (a) With amount collected by the licensee. (b) With amount not considered collectible on a current basis and restored to the appropriate asset acquired in liquidation of portfolio securities account. (See account nos. 200, 204.) 153 -- Current Maturities of Operating Concerns Acquired This account represents the principal amounts due the licensee on a cost basis of debt instruments classified as operating concerns acquired that are reasonably expected to be collected in the normal course of business in the next 12 months of operations. Debit: (a) With amount due the licensee during the current year. Credit: (a) With amount collected by the licensee. (b) With amount not considered collectible on a current basis and restored to other securities accounts. (See account no. 210.) 154 -- Current Maturities of Other Securities This account represents the principal amounts due the licensee on a cost basis of debt instruments classified as "other securities" that are reasonably expected to be collected in the normal course of business in the next 12 months of operations. Debit: (a) With amount due the licensee during the current year. Credit: (a) With amount collected by the licensee. (b) With amount not considered collectible on a current basis and restored to other securities accounts. (See accounts nos. 220 and 221.) 156 -- Other Current Assets This account represents current assets not otherwise classified of the licensee that are expected to be converted to cash or expensed in the normal course of business in the next 12 months. Debit: (a) With amount of such asset. Credit: (a) With amount collected. (b) With the proportionate amount allocated to the period as an expense. 160 -- Investment in Section 301(d) Licensee This account represents the licensee's investment in capital stock of a specialized SBIC. The account will be maintained on the equity method of accounting. 10 06 A Effective Date: 8/3/99 Page 165 (d) With unpaid principal of such debt securities transferred to assets acquired in liquidation of loans and debt securities. (e) With unpaid principal of such debt securities sold, written off or disposed of otherwise. 186 -- Appreciation of Debt Securities This account represents the amount by which the licensee's Board of Directors/General Partner(s) has valued debt securities with equity features above cost of such securities. Debit: (a) With amount of such appreciation recognized. (b) With amount of increases in such appreciation recognized. Credit: (a) With decrease in amount of such appreciation resulting from decline in fair value of securities. (b) With amount of appreciation established in this account for debt securities that have been sold or otherwise disposed of. (See Note to account 187.) 187 -- Depreciation of Debt Securities This account represents the downward valuation of debt securities and should be maintained in an amount not less than a conservative estimate of probable losses. This valuation reserve will be adjusted as occasion demands. Debit: (a) With amount of decreases in depreciation. (b) With amount of depreciation established in this account for debt securities that have been written off, sold, or disposed of otherwise. Credit: (a) With amount of depreciation established. (b) With amount of increases in depreciation. Note -- When debt securities are sold or otherwise disposed of, cash or other appropriate asset account will be debited for the amount received, and the appropriate investment account will be credited for the related asset cost. Any gain will be credited to Account no. 572 and any loss will be debited to Account no. 702. The amount of the reserve which was established in this account for the debt security sold or disposed of otherwise will be reversed and offset against the appropriate unrealized depreciation account in the capital section (e.g., account no. 445 -- Stockholders' Unrealized Depreciation on Loans and Investments). 188 -- Unearned Discount, Fees and Other Charges on Debt Securities This contra account represents the amount of unearned discount, fees, and other charges included in the face amount of debt securities acquired from small businesses. Debit: (a) With amount of discount, fees, and other charges which have become earned through collection or passage of time. (b) With amount of unearned discount, fee, and other charges which is rebated to borrowers upon early repayment of debt securities, or is closed into the asset account upon liquidation of debt securities at less than full amount. Credit: (a) With initial amount of unearned discount (including that equivalent to the determined cost of warrants, options or other stock rights, as explained in Note 2 to account no. 197), fees, and other charges included in the face amount of debt securities. (b) With initial amount of unearned discount (including that equivalent to the determined cost of warrants, options or other stock rights, as explained in Note 2 to account no. 197), fees, and other charges assigned to the licensee in connection with its participation in the purchase of debt securities by other investors. 10 06 A Effective Date: 8/3/99 Page 166 Note 1. -- Unearned discount will be transferred to account no. 516 -- Interest on debt securities, as it becomes earned; unearned fees and other charges will be transferred to account no. 536 -- Application and appraisal fees, under similar circumstances. Note 2. -- Any fees and other charges considered earned immediately upon closing of financing through purchase of debt securities will be recorded directly in the income account without first being entered in this account. 190 -- Capital Stock of Small Businesses, with Stock Purchase Warrants or Options, and/or Conversion Features This account represents the licensee's cost to acquire capital stock of small businesses, when such capital stock has attached stock purchase warrants, options and/or conversion features (capital stock without such rights will recorded in account no. 191). If the warrants, options, or other stock rights have a separate purchase cost, or if a separate cost has otherwise been determined for them, such stock rights will be reflected at cost in account no. 197. Debit: (a) With cost of such capital stock acquired. (b) With portion retained by licensee of such capital stock in which participations have been sold to others. (c) With amount of licensee's participations in acquisitions by others of such capital stock. Credit: (a) With cost of such capital stock which has been divested of stock purchase rights through the expiration of the conversion privilege, the exercise or the expiration of rights conveyed by nondetachable or detachable stock purchase warrants or options, or the detachment of detachable stock purchase warrants or options. (b) With cost of such capital stock converted to another class of capital stock. (c) With cost of such capital stock sold, written off or disposed of otherwise. (See notes 1 and 2 to account no. 170.) 191 -- Capital Stock of Small Businesses -- Other This account represents the licensee's cost to acquire capital stock of small businesses, when such capital stock is acquired without conversion privileges or stock purchase warrants or options; or licensee's cost of stock which has been divested of additional stock rights as the result of (1) the expiration of conversion privileges, (2) the exercise or the expiration of rights conveyed by nondetachable or detachable stock purchase warrants or options, or (3) the detachment of detachable stock purchase warrants or options. Debit: (a) With cost to acquire such capital stock. (b) With cost of such capital stock transferred from account no. 191 upon divestment of additional stock rights. (c) With portion retained by licensee of such capital stock in which participations have been sold to others. (d) With amount of licensee's participations in such capital stock acquired by others. Credit: (a) With cost of such capital stock sold, written off or disposed of otherwise. Note 1. -- The cost of capital stock acquired through the exercise of warrants or options will be the cost of the warrants or options surrendered plus the exercise price. Note 2. -- Capital stock acquired through conversion of debt securities or shares of another class of stock will have the same cost as the converted security, plus any additional consideration required to effect the conversion. 192 -- Appreciation of Capital Stock This account represents the amount by which the licensee's Board of Directors/General Partner(s) has valued capital stock of small businesses above cost of such securities. Debit: (a) With amount of appreciation recognized. 10 06 A Effective Date: 8/3/99 Page 167 Credit: (a) With decrease in amount of appreciation resulting from decline in fair value of securities. (b) With amount of appreciation established in this account on capital stock that has been sold or otherwise disposed of. (See Note to account no. 193.) 193 -- Depreciation of Capital Stock This account represents the downward valuation of capital stock of small businesses by the licensee's Board of Directors/General Partner(s). This account will be maintained in an amount not less than a conservative estimate of probable losses and will be adjusted as occasion demands. Debit: (a) With amount of decreases in depreciation. (b) With amount of depreciation established in this account on capital stock that has been written off, sold, or disposed of otherwise. Credit: (a) With amount of depreciation recognized. Note -- When capital stock is sold or otherwise disposed of, cash or other appropriate asset account will be debited for the amount received, and the appropriate investment account will be credited for the related asset cost. Any gain will be credited to account no. 574 and any loss will be debited to account no. 704. The depreciation which was established in this account for the capital stock sold or disposed of otherwise will be reversed and offset against the appropriate unrealized depreciation account in the capital section (e.g., account no. 445 -- Stockholders' Unrealized Depreciation on Loans and Investments). 194 -- Equity Interests of Unincorporated Concerns This account represents the licensee's investment in equity interests of a small business organized as a limited partnership or other type of unincorporated concern. The equity method should not be used to account for such investments, as this method is incompatible with fair value accounting. Debit: (a) With cost of equity interest acquired. Credit: (a) With the licensee's proportionate share of cash distributions. (b) With cost of equity interest sold, liquidated, written off or disposed of otherwise. 195 -- Appreciation of Equity Interest of Unincorporated Concerns This account represents the amount by which the licensee's Board of Directors/General Partner(s) has valued equity interests of unincorporated concerns above cost of such interests. Debit: (a) With amount of appreciation recognized. Credit: (a) With decrease in amount of appreciation resulting from decline in fair value of securities. (b) With amount of appreciation established in this account on equity interests that have been sold, liquidated or otherwise disposed of. (See Note to account 196.) 10 06 A Effective Date: 8/3/99 Page 170 Debit: (a) With amount of the licensee's investment in asset at time of acquisition. (b) With amount of the licensee's investment in asset at date of judgment, sheriff's certificate, etc. (c) With amount of licensee's participation in assets acquired by others in liquidation of portfolio securities. Credit: (a) With proceeds of partial sale of assets. (b) With amount of the licensee's investment at date of sale or other disposition of assets. (c) With amount written off. Note -- Collateral notes receivable acquired in the liquidation of portfolio securities will be reflected in this account; but notes receivable that are subsequently accepted in connection with the disposition of assets acquired in the liquidation of portfolio securities will be included in account no. 200 -- Receivables from debtors on sale of assets acquired in liquidation of portfolio securities. (See account nos. 170, 180, 184, and 200.) 205 -- Appreciation of Assets Acquired in Liquidation of Portfolio Securities This account represents the amount by which the licensee's Board of Directors/General Partner(s) has valued assets acquired above their cost basis as recorded in account no. 204. Debit: (a) With amount of appreciation recognized. Credit: (a) With decrease in amount of appreciation resulting from decline in fair value of such assets. (b) With amount of appreciation established in this account on such assets that have been sold or otherwise disposed of. (See Note to account no. 206.) 206 -- Depreciation of Assets Acquired in Liquidation of Portfolio Securities This account represents the downward valuation by the licensee's Board of Directors/General Partner(s) of assets acquired in liquidation of portfolio securities. This account will be maintained in an amount not less than a conservative estimate of probable losses and will be adjusted as occasion demands. Debit: (a) With amount of decreases in depreciation of such assets. (b) With amount of depreciation established in this account on such assets that have been written off, sold, or disposed of otherwise. Credit: (a) With amount of depreciation recognized. Note -- When assets acquired in liquidation of portfolio securities are sold or otherwise disposed of, cash or other appropriate asset account will be debited for the amount received, and account no. 204 will be credited for the related asset cost. Any gain will be credited to account no. 577 and any loss will be debited to account no. 707. The depreciation which was established in this account for the assets sold or disposed of otherwise will be reversed and offset against the appropriate unrealized depreciation account in the capital section (e.g., account no. 445 -- Stockholders' Unrealized Depreciation on Loans and Investments). 210 -- Operating Concerns Acquired A licensee may take action to protect its investment in a portfolio concern and as a result may acquire a controlling interest in an operating concern. In such cases, the licensee will reclassify the aggregate amount due from the portfolio 10 06 A Effective Date: 8/3/99 Page 171 concern to this account. If the concern has ceased operations and is being liquidated, the aggregate amount due from the portfolio concern will be classified as assets acquired in liquidation of portfolio securities (account no. 204) rather than this account. Debit: (a) With total amount of the licensee's investment in the operating concern at the time of the acquisition. (b) With additional financing provided by the licensee. Credit: (a) With amount collected from such operating concern. (b) With proportionate cost of interest sold or disposed of otherwise. (c) With amounts written off. (See account nos. 211 and 212.) 211 -- Appreciation of Operating Concerns Acquired This account represents the amount by which the licensee's Board of Directors/General Partner(s) has valued securities of operating concerns acquired above their cost basis Debit: (a) With amount of appreciation recognized. Credit: (a) With decrease in amount of appreciation resulting from decline in fair value of such securities. (b) With amount of appreciation established in this account on such securities that have been sold or otherwise disposed of. (See Note to account no. 212.) 212 -- Depreciation of Operating Concerns Acquired his account represents the amount by which the licensee's Board of Directors/General Partner(s) has valued securities of operating concerns acquired below cost of such securities. Debit: (a) With decreases in amount of such depreciation resulting from increases in fair value of such securities. (b) With amount of depreciation established in this account on such securities that have been sold, written off or otherwise disposed of. Credit: (a) With amount of such depreciation recognized. Note -- When operating concerns acquired are sold or otherwise disposed of, cash or other appropriate asset account will be debited for the amount received, and account no. 210 will be credited for the related asset cost. Any gain will be credited to account no. 578 and any loss will be debited to account no. 708. The depreciation which was established in this account for the assets sold or disposed of otherwise will be reversed and offset against the appropriate unrealized depreciation account in the capital section (e.g., account no. 445 -- Stockholders' Unrealized Depreciation on Loans and Investments). 220 -- Notes and Other Securities Received on Sale of Portfolio Securities This account represents the securities taken by the licensee as part of the net sales price of portfolio securities sold. Debit: (a) With assigned cost of such securities when acquired. 10 06 A Effective Date: 8/3/99 Page 172 Credit: (a) With cost of such securities when sold. (b) With cost of such securities when written off or disposed of otherwise. (See accounts 221, 222, and 223.) 221 -- Other Securities Received This account represents securities received by the licensee for which no funds were provided and which would not otherwise be classified as loans and investments. An example of such securities would be a dividend in kind received by licensee from a portfolio concern. Debit: (a) With fair value of such securities when received. Credit: (b) With carrying value of such securities when sold, written off or disposed of otherwise. (See accounts 220, 222, and 223.) 222 -- Appreciation of Other Securities This account represents the amount by which the licensee's Board of Directors/General Partner(s) has valued securities recorded in accounts no. 220 and 221 above licensee's cost basis. Debit: (a) With amount of such appreciation recognized. Credit: (a) With decrease in amount of such appreciation resulting from decline in fair value of securities. (b) With amount of appreciation established in this account on other securities that have been sold or otherwise disposed of. (See Note to account no. 223.) 223 -- Depreciation of Other Securities This account represents the amount by which the licensee's Board of Directors/General Partner(s) has valued securities recorded in accounts no. 220 and 221 below licensee's cost basis. Debit: (a) With decreases in amount of such depreciation resulting from increase in fair value of such securities. (b) With amount of depreciation established in this account on other securities that have been sold, written off or otherwise disposed of. Credit: (a) With amount of such depreciation recognized. Note -- When "other securities" are sold or otherwise disposed of, cash or other appropriate asset account will be debited for the amount received, and account no. 220 or 221 will be credited for the related asset cost. Any gain will be credited to account no. 579 and any loss will be debited to account no. 709. The depreciation which was established in this account for the assets sold or disposed of otherwise will be reversed and offset against the appropriate unrealized depreciation account in the capital section (e.g., account no. 445 -- Stockholders' Unrealized Depreciation on Loans and Investments). 230 -- Prepaid Expenses 10 06 A Effective Date: 8/3/99 Page 175 This account represents the cost of improvements to leased premises used as the licensee's place of business. The amount of this account will be amortized through account no. 656 over the life of the lease or the life of the improvements, whichever is shorter. Debit: (a) With cost of leasehold improvements. Credit: (a) With periodic amortization. (b) With cost of leasehold improvements written off. 260 -- Deferred Tax Asset This account represents the deferred tax consequences attributable to deductible temporary differences and carryforwards in accordance with FASB Statement 109. Such deductible temporary differences are differences between the tax basis of an asset or liability and its reported amount in the financial statements that will result in future deductible amounts when the reported amount of the asset or liability is recovered or settled, respectively. A licensee must reduce a deferred tax asset by a valuation allowance if, based on available evidence, it is more likely than not that some or all of the deferred tax asset will not be realized (see account 261). Debit: (a) With the amount of the deferred tax asset. Credit: (a) With deductible amount realized which had previously been recorded as a deferred tax asset. 261 -- Valuation Allowance for Deferred Tax Asset This account represents a valuation allowance established in accordance with FASB Statement 109 as a reduction of a deferred tax asset if, based on available evidence, it is more likely than not that some or all of the deferred tax asset will not be realized. Debit: (a) With amount of a decrease in valuation allowance for a deferred tax asset. (b) With amount of valuation allowance when a deferred tax asset is realized or expires. Credit: (a) With amount of valuation allowance established for a deferred tax asset. (b) With amount of increase in valuation allowance for a deferred tax asset. 275 -- Amounts Due from Directors, Officers, Owners, Employees, etc. This account represents the unpaid balance of amounts advanced to directors, officers, shareholders, general partners, limited partners and employees. Debit: (a) With amount of such advances made. Credit: (a) With amount collected on such advances. (b) With amount transferred to appropriate expense classification upon proper authorization. (c) With amount written off or disposed of otherwise. 277 -- Funds in Escrow 10 06 A Effective Date: 8/3/99 Page 176 This account represents the amount of funds placed in escrow (e.g., funds escrowed pending the closing of a financing). Debit: (a) With amount of funds placed in escrow. Credit: (a) With amount of funds withdrawn from escrow. 278 -- Deferred Financing Costs This account represents the unamortized balance of fees paid to SBA and other parties (such as underwriters) in connection with licensee's issuance of SBA-guaranteed debentures or participating securities. Leverage fees paid on debentures should be amortized over the life of the instruments (generally 10 years). Leverage fees paid on participating securities may be amortized over not less than 5 years. Debit: (a) With amount of fees paid. Credit: (a) With periodic amortization expense. 279 -- Other Assets This account represents miscellaneous assets of the licensee for which no specific account has been provided. Debit: (a) With amount of the licensee's investment in such assets. Credit: (a) With amount of such assets sold or disposed of otherwise. Liability Accounts 300 -- Notes Payable to SBA This account represents the long-term principal balance of notes payable (1) for funds borrowed and received directly from the Small Business Administration, and (2) for funds borrowed from others through guaranteed loans which subsequently have been purchased by the Small Business Administration. Debit: (a) With amount of principal payments made on such notes. (b) With amount of principal transferred to current maturities. Credit: (a) With amount of funds borrowed. (b) With unpaid principal balance of guaranteed loans purchased by SBA (contra debit will be made to account no. 310). (See account no. 330.) 301 -- Debentures Payable to SBA 10 06 A Effective Date: 8/3/99 Page 177 This account represents the long-term outstanding principal balance of debentures issued to the Small Business Administration. Debit: (a) With amount of principal payments made to SBA on such debentures. (b) With amount of principal transferred to current maturities. Credit: (a) With face amount of such debentures issued. (See account no. 330.) 310 -- Debentures Guaranteed by SBA This account represents the long-term outstanding principal balance of debentures guaranteed by the Small Business Administration. Debit: (a) With amount of principal payments made on such debentures. (b) With unpaid principal balance of such debentures purchased by SBA (contra credit will be made to account no. 300). (c) With amount of principal transferred to current maturities. Credit: (a) With face amount of such debentures issued. (See account no. 330.) 311 -- Long-Term Non-SBA Debt This account represents the long-term outstanding principal balance of notes neither payable to nor guaranteed by the Small Business Administration. Debit: (a) With amount of principal payments made on such notes. (b) With amount of principal transferred to current maturities. Credit: (a) With amount of funds borrowed. (See account no. 331.) 312 -- Mortgages Payable This account represents the long-term outstanding principal balance of mortgages payable on real estate owned by the licensee, other than real estate acquired in liquidation of portfolio securities (see account no. 313). Debit: (a) With amount of principal payments made on such indebtedness. (b) With amount of principal transferred to current maturities. Credit: (a) With amount of funds borrowed. (See account no. 331.) 313 -- Mortgages Payable on Assets Acquired in Liquidation of Portfolio Securities 10 06 A Effective Date: 8/3/99 Page 180 Debit: (a) With amount of such taxes paid. Credit: (a) With amount of such taxes accrued. 354.2 Estimated State Income Taxes Accrued -- This account represents the balance of estimated State income taxes accrued which have not been remitted to the appropriate collector of such taxes. Debit: (a) With amount of such taxes paid. Credit: (a) With amount of such taxes accrued. 358 -- Other Current Liabilities This account represents other current liabilities not provided for in other accounts. Debit: (a) With amounts paid or disposed or otherwise. Credit: (a) With amounts accrued. 360 - 364 -- Dividends Payable on Capital Stock (By Class) These accounts represent a corporate licensee's liability for dividends declared by its Board of Directors on the respective types and classes of capital stock issued and outstanding. A separate account should be used to reflect the dividends payable for each type and class of capital stock outstanding. Debit: (a) With amount of dividends paid. Credit: (a) With amount of dividends declared. 365 - 369 -- Partnership Distributions Payable to General Partners/Limited Partners Debit: (a) With amount of distributions paid. Credit: (a) With amount of distributions accrued. 370 -- Employee Taxes Withheld This account represents the amount of income and payroll taxes withheld from employees' salaries which have not been remitted to the appropriate collectors of such taxes. Debit: (a) With amount of such taxes remitted. Credit: (a) With amount of such taxes withheld. 10 06 A Effective Date: 8/3/99 Page 181 374 -- Unapplied Receipts This account represents funds received by the licensee which have not been applied to loans, debt securities, interest receivable, etc. This account will be used only in instances when the funds received cannot be applied promptly. Debit: (a) With amount of such funds applied or disposed of otherwise. Credit: (a) With amount of funds received which cannot be applied promptly. 378 -- Miscellaneous Trust Receipts This account represents the liability of the licensee for miscellaneous funds withheld or received in trust, including earnest money deposits, and funds withheld from employees' salaries for payment of group insurance premiums, pension fund contributions, etc. The account will also include amounts due other companies that are participants in financing where the licensee is the sponsor and is servicing the debt. Debit: (a) With amount of such funds disbursed or disposed of otherwise. Credit: (a) With amount of such funds withheld or received. 380 -- Deferred Tax Liability This account represents the deferred tax consequences attributable to taxable temporary differences in accordance with FASB Statement 109. Such taxable temporary differences are between the tax basis of an asset or liability and its reported amount in the financial statements that will result in future taxable amounts when the reported amount of the asset or liability is recovered or settled, respectively. Debit: (a) With the amount of taxes paid which had previously been deferred. Credit: (a) With the amount of deferred tax liability. (See accounts 260, 261 and 448.) 383 -- Other Deferred Credits This account represents the amount of deferred credits of the licensee not specifically provided for in other accounts. The account will include any gain on sale of assets which does not qualify as realized gain. Debit: (a) With amount of such deferred credits transferred to income or gain, or disposed of otherwise. Credit: (a) With amount of such deferred credits established. (See Note 2 to account no. 143.) Note 1. -- Deferred gain in this account will be transferred to appropriate gain accounts as it is realized. 390 -- Other Liabilities 10 06 A Effective Date: 8/3/99 Page 182 This account represents liabilities of the licensee not specifically provided for in other accounts. Debit: (a) With amount of such liabilities paid or disposed of otherwise. Credit: (a) With amount of such liabilities incurred. Capital Accounts 400 - 404 Capital Stock These accounts represent the total par or stated value of the capital stock issued. A separate account should be provided for each type and class of capital stock. Debit: (a) With par value of capital stock retired. Credit: (a) With par value of capital stock issued. 406 - 407 Capital Stock Subscribed. These accounts represent the total amount at the subscription price of the licensee's capital stock subscribed. A separate account should be provided for each type and class of capital stock subscribed. These accounts reflect the licensee's responsibility to issue shares of its stock to subscribers who have made final payment of their capital stock subscriptions. Debit: (a) With amount at the subscription price of subscribed capital stock issued (credit will be made to accounts nos. 400 - 404). (b) With amount at the subscription price of subscribed capital stock canceled or disposed of otherwise. Credit: (a) With amount at the subscription price of capital stock subscribed. (See account nos. 409 - 410.) 409 - 410 -- Capital Stock Subscriptions Receivable These accounts represent the total unpaid balances of capital stock subscriptions receivable from subscribers of the licensee's capital stock. A separate subscriptions receivable account should be provided for each type and class of capital stock subscribed. Debit: (a) With amount of capital stock subscribed. Credit: (a) With amount collected on capital stock subscriptions. (b) With amount of capital stock subscriptions canceled or disposed of otherwise. (See account nos. 406 - 407.) 412 - 414 -- Treasury Stock 10 06 A Effective Date: 8/3/99 Page 185 to the carrying amount of 4 percent preferred limited partnership interests. The accumulated returns must be paid no later than the date of redemption of the securities. The 4 percent preferred limited partnership interests have a mandatory redemption date of no later than 15 years after the date of issuance. Debit: (a) With the amount of 4 percent returns paid in the current period which had previously been credited to this account as unpaid accumulated 4 percent returns. Credit: (a) With the amount of returns accrued at an annual rate of 4 percent on preferred limited partnership interests for a given period. The corresponding debits will be to account nos. 493, 494 and 496. 434 -- Participating Securities (Partnership) This account will be used by partnership licensees which have issued Participating Securities and represents the carrying amount of the issued securities (original issue price less any amounts redeemed). These securities take the form of preferred limited partnership interests, with SBA as the preferred limited partner. The securities must be redeemed by the partnership no later than the redemption date (generally 10 years from the date of issue) at the Redemption Price plus any unpaid Earned Prioritized Payments and any additional earned amounts due pursuant to SBA regulations. Debit: (a) With amount of Participating Securities redeemed. Credit: (a) With original issue price of Participating Securities. 435 -- Prioritized Payments Distribution Account This account will be used by partnership licensees which have issued Participating Securities and represents the total amount of Earned Prioritized Payments, earned Adjustments and earned Charges allocated to SBA in accordance with 13 CFR 107.1520, but not yet paid. Licensees are required to pay the balance in this account before any distributions can be made to their private investors. Debit: (a) With the amount of any payments made by the licensee representing Earned Prioritized Payments, Adjustments and Charges. Credit: (a) With the amount of any Prioritized Payments which have become Earned (see 13 CFR 107.1500 and 107.1520). 10 06 A Effective Date: 8/3/99 Page 186 (b) With the amount of any Adjustments or Charges which have become Earned(see 13 CFR 107.1500 and 107.1520). 436 -- Profit Participation Allocated to SBA This account will be used by partnership licensees which have issued Participating Securities and represents the amount of Profit Participation allocated to SBA under 13 CFR 107.1530, but not yet distributed. Distributions of allocated Profit Participation amounts to SBA are to coincide with distributions to private investors made in accordance with 13 CFR 107.1550, 107.1560 or 107.1570(a). Debit: (a) With distributions of Profit Participation allocated to SBA. Credit: (a) With Profit Participation allocated to SBA. 440 -- Unrealized Appreciation on Investments--Corporations This is a credit balance account and represents the aggregate amount by which a corporate licensee's Board of Directors/General Partner(s) has valued the licensee's investments above cost. Debit: (a) With decrease in amount of appreciation resulting from decline in fair value of securities held. (b) With amount of appreciation attributable to securities sold or disposed of otherwise. Credit: (a) With amount of appreciation recognized. (See account nos. 186, 192, 195, 198, 205, 211 and 222.) 445 -- Unrealized Depreciation on Loans and Investments--Corporations This is a debit balance account and represents the aggregate amount by which a corporate licensee's Board of Directors/General Partner(s) has valued the licensee's loans and investments below cost. Debit: (a) With amount of depreciation recognized. Credit: (a) With decrease in the amount of depreciation resulting from increase in fair value of securities held. (b) With amount of depreciation attributable to securities sold or disposed of otherwise. (See account nos. 172, 187, 193, 196, 199, 203, 206, 212 and 223.) 448 -- Estimated Taxes on Net Unrealized Gain (Loss) on Securities Held This account represents an estimated income tax provision or benefit on net unrealized appreciation or depreciation recorded in account nos. 440 and/or 445. As the valuation of securities changes, the provisions for taxes will change. Debit: (a) With tax provisions attributable to net unrealized gain. (b) With decreases in established tax benefits resulting from change in valuation of securities. (c) With established tax benefits attributable to securities sold, written off or disposed of otherwise. Credit: (a) With tax benefits attributable to net unrealized loss (subject to likelihood of realization--see account nos. 260 and 261). (b) With decreases in established tax provisions resulting from change in valuation of securities. 10 06 A Effective Date: 8/3/99 Page 187 (c) With established tax provisions attributable to securities sold or disposed of otherwise. (See account nos. 260 and 380.) 450 -- Noncash Gains/Income--Corporations This is a credit balance account and represents a corporate licensee's realized gains and income that have not been converted to cash (see "Accounting Standards and Financial Reporting Requirements for SBICs, section V, paragraph X). While considered to be undistributed earnings, amounts in this account will not be available for distributions or capitalization. Therefore, such amounts are considered restricted undistributed realized earnings. Debit: (a) With amount of cash collected of noncash gains/income previously recognized. (b) With amount of noncash gains/income written off or disposed of otherwise. Credit: (a) With amounts of noncash gain/income recognized. 451 -- Undistributed Net Realized Earnings (Loss)--Corporations This account represents the cumulative balance of periodic net income (loss) for a corporate licensee, including realized gain (loss) on securities sold, less dividend distributions, and excluding non-cash gains/income which are included in account no. 450. Debit: (a) At end of the fiscal year, with the debit balance of all income and expense accounts, and accounts representing gains and losses on portfolio securities. (b) With amount of cash dividends (or fair value at declaration date of in-kind dividends) declared payable out of undistributed net realized earnings by the licensee's Board of Directors. (c) With loss on reissuance of treasury stock which exceeds paid-in surplus attributable to such stock or to treasury stock previously reissued or retired (see account no. 416). (d) With amount paid in excess of par plus paid-in surplus recorded at the time of issuance, to acquire capital stock to be retired. (e) With amount of dividends accrued for a period, but not yet declared, on 4 percent preferred stock sold to SBA by a Section 301(d) Licensee. Credit: (a) At end of the fiscal year, with the credit balances of all income and expense accounts, and accounts representing gains and losses on portfolio securities, except for credit balances representing non-cash gains/income (see account no. 450). 452 -- Year-to-date Net Income (Loss)--Corporations This account may be used to accumulate a corporate licensee’s year-to-date balance of net income (loss). Any balance in this account should be closed at the end of the fiscal year to the appropriate Undistributed Net Realized Earnings (Loss) or Noncash Gains/Income account. Debit: (a) For any given closing date within a fiscal year, with the year-to-date debit balances of all income and expense accounts, and accounts representing gains and losses on portfolio securities. Credit: (a) For any given closing date within a fiscal year, with the year-to-date credit balances of all income and expense accounts, and accounts representing gains and losses on portfolio securities. 471 -- Entity General Partners' Permanent Capital Contribution 10 06 A Effective Date: 8/3/99 Page 190 (See account nos. 172, 187, 193, 196, 199, 203, 206, 212 and 223.) 491 -- Entity General Partners' Noncash Gains/Income This is a credit balance account and represents the entity general partner's share of realized gains and income that have not been converted to cash (see "Accounting Standards and Financial Reporting Requirements for SBICs, section V, paragraph X). While considered to be undistributed earnings, amounts in this account will not be available for distribution or capitalization unless specifically permitted by SBA regulations (see 13 CFR 107.1580). Therefore, such amounts are considered restricted undistributed earnings realized. Debit: (a) With cash collections of noncash gains/income previously recognized. (b) With noncash gains/income written off, distributed in kind to partners, or disposed of otherwise. Credit: (a) With amounts of noncash gains/income recognized. 492 -- Individual General Partners' Noncash Gains/Income This is a credit balance account and represents the individual general partners' share of realized gains and income that have not been converted to cash (see "Accounting Standards and Financial Reporting Requirements for SBICs, section V, paragraph X). While considered to be undistributed earnings, amounts in this account will not be available for distribution or capitalization unless specifically permitted by SBA regulations (see 13 CFR 107.1580). Therefore, such amounts are considered restricted undistributed earnings realized. Debit: (a) With cash collections of noncash gains/income previously recognized. (b) With noncash gains/income written off, distributed in kind to partners, or disposed of otherwise. Credit: (a) With amounts of noncash gains/income recognized. 493 -- Entity General Partners' Undistributed Net Realized Earnings (Loss) This account represents the entity general partner's share of the partnership's cumulative balance of periodic net income (loss), including realized gain (loss) on securities sold, less distributions, and excluding non-cash gains/income which are included in account no. 491. Debit: (a) At end of the fiscal year, with entity general partner's share of the debit balances of all income and expense accounts, and accounts representing gains and losses on portfolio securities. (b) With entity general partner's share of cash distributions (or fair value of in-kind distributions) paid or allocated from undistributed net realized earnings. Credit: 10 06 A Effective Date: 8/3/99 Page 191 (a) At end of the fiscal year, with entity general partner's share of the credit balances of all income and expense accounts, and accounts representing gains and losses on portfolio securities, except for credit balances representing non-cash gains/income (see account no. 491). 494 -- Individual General Partners' Undistributed Net Realized Earnings (Loss) This account represents the individual general partners' share of the partnership's cumulative balance of periodic net income (loss), including realized gain (loss) on securities sold, less distributions, and excluding non-cash gains/income which are included in account no. 492. Debit: (a) At end of the fiscal year, with individual general partners' share of the debit balances of all income and expense accounts, and accounts representing gains and losses on portfolio securities. (b) With individual general partners' share of cash distributions (or fair value of in-kind distributions) paid or allocated from undistributed net realized earnings. Credit: (a) At end of the fiscal year, with individual general partners' share of the credit balances of all income and expense accounts, and accounts representing gains and losses on portfolio securities, except for credit balances representing non- cash gains/income (see account no. 492). 495 -- Limited Partners' Noncash Gains/Income This is a credit balance account and represents the limited partners' share of realized gains and income that have not been converted to cash (see "Accounting Standards and Financial Reporting Requirements for SBICs, section V, paragraph X). While considered to be undistributed earnings, amounts in this account will not be available for distribution or capitalization unless specifically permitted by SBA regulations (see 13 CFR 107.1580). Therefore, such amounts are considered restricted undistributed earnings realized. Debit: (a) With amount of cash collected of noncash gains/income previously recognized. (b) With amount of noncash gains/income written off, distributed to partners, or disposed of otherwise. Credit: (a) With amounts of noncash gains/income recognized. 496 -- Limited Partners' Undistributed Net Realized Earnings (Loss) This account represents the limited partners' share of the partnership's cumulative balance of periodic net income (loss), including realized gain (loss) on securities sold, less distributions, and excluding non-cash gains/income which are included in account no. 495. Debit: (a) At end of the fiscal year, with limited partners' share of the debit balances of all income and expense accounts, and accounts representing gains and losses on portfolio securities. (b) With limited partners' share of cash distributions (or fair value of in-kind distributions) paid or allocated from undistributed net realized earnings. Credit: (a) At end of the fiscal year, with limited partners' share of the credit balances of all income and expense accounts, and accounts representing gains and losses on portfolio securities, except for credit balances representing non-cash gains/income (see account no. 495). 497 -- Partnership Year-to-date Net Income This account may be used to accumulate a partnership licensee’s year-to-date balance of net income (loss). Any balance in this account should be closed at the end of the fiscal year to the appropriate Undistributed Net Realized Earnings (Loss) or Noncash Gains/Income account. 10 06 A Effective Date: 8/3/99 Page 192 Debit: (a) For any given closing date within a fiscal year, with the year-to-date debit balances of all income and expense accounts, and accounts representing gains and losses on portfolio securities. Credit: (a) For any given closing date within a fiscal year, with the year-to-date credit balances of all income and expense accounts, and accounts representing gains and losses on portfolio securities. Income/Gain Accounts GENERAL NOTE: Income and gain accounts (account nos. 500 through 599) normally have credit balances. At year end, all such accounts must be closed to the appropriate Undistributed Realized Earnings account, either directly or through the use of one or more clearing accounts created by the licensee. 500 -- Commitment Fee Income This account represents the amount of fee income earned on commitments to small businesses for loans and equity securities. Nonrefundable fees charged in connection with the origination of a financing may be recognized as income in the period in which the loan is originated. Alternatively, licensees may defer and amortize such fees (net of related costs) over the term of the financing. If a licensee has made a commitment for a financing which does not take place, any nonrefundable commitment fee or "break-up fee" (see 13 CFR 107.860(g)) to which the Licensee is contractually entitled is recognized as income when due. 510 -- Interest on Invested Idle Funds This account represents the amount of interest earned on permitted investments of idle funds. For licensees with outstanding leverage or applying for leverage, such investments are limited to those listed in 13 CFR 107.530(b). 512 -- Interest on Loans This account represents the amount of interest earned on loans to small businesses. See Note 2 to account no. 143 regarding accrual of interest under circumstances in which collection is doubtful. 516 -- Interest on Debt Securities This account represents the amount of interest earned on debt securities of small businesses held by the licensee. See Note 2 to account no. 143 regarding accrual of interest under circumstances in which collection is doubtful. 520 -- Interest Income -- Other This account represents the amount of interest earned on miscellaneous notes receivable, funds in escrow, and interest-bearing receivables not otherwise classified. See Note 2 to account no. 143 regarding accrual of interest under circumstances in which collection is doubtful. 532 -- Management Service Fees This account represents the amount of fees charged for management services rendered to small businesses and other small business investment companies pursuant to section 13 CFR 107.900. 534 -- Investigation and Service Fees Charged Other Lenders This account represents the amount of fees charged for investigation and services rendered to banks or other lenders or investors. 536 -- Application, Closing and Other Fees This account represents the amount of "application" and "closing" fees earned in accordance with 13 CFR 107.860. The account may also include income earned on other appraisal, investigation, and related services rendered to small 10 06 A Effective Date: 8/3/99 Page 195 This account represents the amount of charges to the licensee by its transfer agent and the registrar for services rendered in connection with the issuance and transfer of licensee's capital stock, and will include other financial expenses not provided for elsewhere. 650 - 679 -- Operating Expenses 650 -- Advertising and Promotional Costs This account represents the cost of advertising and promoting the licensee's services, including the cost of entertaining prospective borrowers and clients. 651 -- Appraisal and Investigation Costs This account represents charges made by outside firms and individuals for appraisal, investigation, and related services rendered to the licensee. 652 -- Auditing and Examination Costs This account represents charges for auditing, examination, and bookkeeping services rendered by accountants not on the licensee's payroll, and examination fees charged by SBA. 653 -- Communications This account represents telephone, postage, express delivery and related expenses. 654 -- Cost of Space Occupied This account represents the cost of space occupied such as rent, alterations, light, heat, power, janitor service, maintenance and repair expense on buildings, furniture, and equipment (other than automobiles), etc. 655 -- Depreciation of Business Premises Owned, Furniture, Equipment and Automobiles This account represents the provision applicable to the fiscal period for depreciation of real and personal property owned by the licensee and recorded in account nos. 240 and 250. Licensee may depreciate such assets using any generally accepted method. Amortization of leasehold improvements will be recorded in account no. 656. 656 -- Amortization of Leasehold Improvements This account represents the periodic amortization of leasehold improvements recorded in account no. 252. 657 -- Directors, Stockholders' or Partners' Meetings Costs This account represents directors' fees and travel expense for attendance at directors' and stockholders' or partners' meetings. The account also will include the cost of holding stockholders' or partners' meetings, such as rental of the meeting hall and related expenses. 658 -- Insurance This account represents fire, theft, employee group life insurance, and other insurance expense, including fidelity bond, premiums and insurance on automobiles. The portion, if any, of employee group life insurance premiums withheld from salaries or received from employees will be reflected in account no. 378. Prepaid insurance premiums will be recorded initially in account no. 230. 659 -- Management Services Fees This account represents expense incurred for management services provided to licensee by outside firms or individuals, pursuant to a management agreement approved by SBA. A licensee which pays a management fee that covers its normal operating expenses may record the entire fee in this account; it is not necessary to allocate the fee to the various operating expense accounts. 660 -- Investment Advisor Costs 10 06 A Effective Date: 8/3/99 Page 196 This account represents expense incurred for investment management and advice provided to licensee by outside firms or individuals, pursuant to an agreement approved by SBA. 661 -- Legal Services This account represents the cost of outside legal services rendered to the licensee. 663 -- Salaries This account will include the balance in subaccount nos. 663.1 and 663.2. 663.1 -- Salaries of Officers or Partners This account represents the salary expense for all officers/partners of the licensee, including directors' salaries, if any, but not directors' fees for attendance at meetings. 663.2 -- Salaries of Employees This account represents the salary expense for all employees other than officers/partners, including salaries of any temporary or part-time employees engaged for specific assignments. 664 -- Taxes, Excluding Income Taxes This account represents the cost of all taxes, including those on real property, motor vehicles and other personal property, licensee's portion of social security taxes, and other tax expense, exclusive of income taxes. 665 -- Travel This account represents all travel expense, including transportation charges, automobile maintenance, operating expense, meals, lodging, telephone, and other costs incurred by partners, officers, employees, etc. while traveling on behalf of the licensee. 670 -- Employee Benefits Expense This account represents expense incurred for employee retirement benefits and other types of employee benefits, except group life insurance. The portion, if any, of the cost of employee benefits withheld from salaries or received from employees will be reflected in account no. 378. 672 -- Organization Costs This account represents the amount of legal fees, promotional expense, stock certificate costs, incorporation fees, taxes, and other related costs incurred in organizing the licensee. Previously, generally accepted accounting principles required organization costs to be capitalized and amortized over a 5-year period. However, in accordance with AICPA Statement of Position 98-5 (April 3, 1998), organization costs should now be expensed as they are incurred. The Statement is effective for fiscal years beginning after December 15, 1998, but earlier application is encouraged in fiscal years for which financial statements have not been issued. 673 -- Amortization of Deferred Financing Costs. This account represents the portion of deferred financing costs from account no. 278 recognized as a period expense. 679 -- Miscellaneous Operating Expenses This account represents the amount of operating expenses not specifically provided for in other accounts. Examples include dues, subscriptions, bank service charges, office supplies, etc. 680 -- Estimated Losses on Receivables This account represents the amount of estimated losses applicable to the fiscal period on notes and accounts receivable, and interest receivable. 700 -- Loss on U.S. Government Securities 10 06 A Effective Date: 8/3/99 Page 197 This account represents realized loss on the sale or other disposition of United States Government obligations, direct or fully guaranteed, recorded in account nos. 130 - 135. 701 -- Loss on Loans This account represents realized loss on the sale, writeoff or other disposition of loans recorded in account no. 170. 702 -- Loss on Debt Securities This account represents realized loss on the sale, writeoff or other disposition of debt securities recorded in account nos. 180 and 184. 704 -- Loss on Capital Stock of Small Businesses This account represents realized loss on the sale, writeoff or other disposition of capital stock of small businesses recorded in account nos. 190 and 191. 705 -- Loss on Equity Interests in Unincorporated Concern This account represents realized loss on the sale, writeoff or other disposition of equity interests in unincorporated concerns recorded in account no. 194. Under SBIC accounting guidelines, licensees account for their portfolio investments at fair value and do not use the equity method. Therefore, a licensee should not reduce its cost basis (in account no. 194) or reflect a loss in this account based on losses allocated to it by an unincorporated portfolio concern. 706 -- Loss on Warrants, Options, and Other Stock Rights Acquired from Small Businesses This account represents realized loss on the sale, writeoff or other disposition of warrants, options, and other stock rights recorded in account no. 197 or memorandum account NA-10. 707 -- Loss on Assets Acquired in Liquidation of Portfolio Securities This account represents realized loss on the sale, writeoff or other disposition of assets acquired in liquidation of portfolio securities, recorded in account nos. 200 and 204. 708 -- Loss on Operating Concerns Acquired This account represents realized loss on the sale, writeoff or other disposition of investments in operating concerns acquired, recorded in account no. 210. 709 -- Loss on Other Assets This account represents realized loss on the sale, writeoff or other disposition of miscellaneous assets not specifically provided for in other accounts. 710 -- Expense on Assets Acquired in Liquidation of Portfolio Securities This account represents expense incurred on assets acquired in liquidation of portfolio securities (account no. 204), including the operation and depreciation of properties. The account also will include interest expense arising from mortgages on such assets assumed by the licensee. 715 -- Other Expenses This account represents miscellaneous nonoperating expenses not specifically provided for in other accounts. 720 -- Income taxes -- Net Investment Income This account will include the balances in subaccount nos. 720.1, 720.2, 720.3, etc. 720.1 -- Federal Income Taxes -- Net Investment Income This account represents licensee's Federal income tax provision applicable to its net investment income for the current fiscal year. If licensee has a Federal income tax benefit, it may be credited to this account. 720.2 -- State Income Taxes -- Net Investment Income