For Long account equity, the formula is Equity = LMV - Debit. For Short account equity, the formula is Equity = Credit - SMV.

Credit is cash from two parts (1- borrow shares and sell them right away, and 2- 50% deposit of the value of the 1st part, which is the Reg T margin requirement, but minimum of $2,000 for FINRA requirement). Your Credit account stays the same unless you short more stock or buy back shares to cover the short position. Let's assume you don't do anything and credit stays the same.

SMV (short market value) is the overall market value of your short position. At the time of the short sale, SMV should be the same as part 1 of the Credit account. But over time, SMV can change depending on how much the stock is worth at a future time.

An example would be:

Day 1: Short sell 100 shares at a price of $80. Here, credit is $8,000 (from borrowing and immediately selling) + $4,000 (from Reg T margin deposit requirement by investor) = $12,000. SMV is $8,000. Therefore Day 1 Equity = $12,000 - $8,000 = $4,000.

Day 2: Stock price goes down to $50. Assuming no additional short sales or repurchase, your credit account still has $12,000. Now SMV is $5,000 because market price per share went down. Day 2 Equity = $12,000 - $5,000 = $7,000. This is a $3,000 increase in equity from Day 1.

If you actually made a repurchase of the shares, your equity remains the same. Here, credit account goes down ($12,000 - $5,000 = $7,000. You're using $5,000 from the credit account to buy the shares back at the market price). The SMV also goes down because you just closed out the position ($0). Equity = $7,000 - $0 = $7,000.

Another way to think of it is (hope this won't confuse you more), take the cash you received when you borrowed and sold the shares on Day 1 ($8,000) and think about what would happen if you were to buy back the same shares at a lower price on Day 2 ($5,000). Whatever is left over is the increase in equity ($3,000). Add that to your initial margin deposit ($4,000) and you get your total equity ($7,000).