What's an account called that always balances to 0?

Question

I use a pretty standard double-entry system in GnuCash (Income/Expenses, Assets/Liabilities).

With my wife going back to school this fall, I did something in my accounting that I haven't done before: I created a "holding" account, and I want to know what the proper terminology is.

The university has several charges (various fees, tuition, etc), and we pay it several different ways (multiple loans and checking). Instead of dividing up the expenses with the assets/liabilities in an arbitrary way, I created this "holding" account that acts as an intermediary. So the funds from assets/liabilities go into that account and funds move from that account to the expenses; the "holding" account always ends up with a balance of 0.

I like how it ended up: there aren't any arbitrary divisions, and the "holding" account is useful because it matches the university's statements of our account (from their perspective).

I'm thinking about repeating this pattern in some other areas (specifically, the annoying way my work handles partial expense reimbursements). But what should I call it, and what kind of account is this, really? Right now it's just a "liability" on the books, but it could be anything.

Answer 1

Payables

It's very clever, the way you have invented a "payables account" for yourself, and that's very good technique, using more descriptive accounts for clearer reporting.

A payables account is indeed a liability as you've booked. It's a recognition of future outflows that have not been paid yet to properly account for accrued net worth.

As long as the final payments are booked as expenses and credit away the payables account, they are properly booked.

However, as a warning, while increased complexity brings increased resolution, it also introduced a higher probability of error, so I suggest creating a "balancing account" to use when the accounts don't make sense.

0 balance

It should be noted that the payables account only temporarily has a 0 balance and frequently has a positive balance.

The only account that should technically be kept to 0 is the balancing account.