DEFINITION of 'Sub Account'

A segregated balance of funds (account) for which the bank acts on behalf of the account holder. Such accounts operate under very strict guidelines, as funds can only be accessed in accordance with the terms of a Power of Attorney agreement approved and executed by the bank. The deposited funds are not bank assets.

BREAKING DOWN 'Sub Account'

A sub account is often used to compartmentalize larger accounts, thereby allowing for better tracking of various budget details and expenses. For example, a company might set up sub accounts for each of its departments for ease of record keeping.

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