Paul’s suggestion was to create a custom nominal to represent the interest only. I think what you should maybe have done is:
- purchase invoice for £20k (not 23k)
- 7k deposit is a part payment against that purchase
- create a loan account to represent the HP element
- pay off the rest of the purchase from the loan account, leaving the purchase fully paid up and the loan account £13k overdrawn
Now create a nominal in the overheads section to represent the cost of the interest. Your accountant’s initial suggestion of “set the full HP amount (£23k, so includes £3k interest) up as a loan” suggests you should just manually create a £3k “money out” transaction in the loan account and tag it via “something not on the list” to the HP interest nominal.
At this point the purchase is paid up and the loan account is overdrawn by £16k, and subsequent repayments are just bank transfers from your current account to the loan account until its balance reaches zero at the end of the 35 months.
However doing the interest as one £3k lump would mean the whole £3k gets assigned as a cost to this year’s P&L rather than spreading it across the three or four financial years covered by the 35 month term - I’d check again with the accountant whether this is correct, it may be necessary to split this £3k into monthly or yearly chunks to apportion it better.