How do I set up a loan given to someone to be paid over a period of 2 years including interest?

It's good to see you posting today, FilisGal!

I'll walk you through setting up the loan you've provided, and we'll create a sample repayment with interest for your visual reference. You'll be the one to determine the interest that will be added to each repayment.

Step 1: Create a Current Asset account to track the loan. We use an asset account because the loaned amount still belong to your business, but you can ask an accountant about this.

1. Go to the Gear icon and choose Chart of Accounts.
2. Click the New button.
3. In the Account Type field, select Current assets.
4. In the Detail Type field, choose Loan to Others.
5. Name the account, and put a description to distinguish it from other loan accounts in the future. The description can be the name of the borrower, the term, the interest, or anything about the loan. 
6. Leave the Balance field blank and click Save and Close.

Step 2: Create an Income or a different type of account to track the interests. Let's use Other Income in this sample.
 

1. Go to the Gear icon and choose Chart of Accounts.
2. Click the New button.
3. In the Account Type field, select Other Income.
4. Choose Save and Close.

Step 3: Create a cheque or an expense transaction to record the loan disbursement. This decreases the bank balance and increases the loan account balance.

1. Click +New and choose Cheque or Expense.
2. Select a payee or click Add new to add the borrower as a supplier.
3. In the Bank Account field, select the account where the money was taken from.
4. Go to the Category details table and enter the following:
   • CATEGORY: Select the loan account in Step 1.
   • AMOUNT: Enter the loan amount.
   • GST: Please ask an accountant or leave this blank.
5. Click Save and close.

Step 4: Record the repayments as deposits (money-in) with another line for the interest.

1. Click +New and choose Bank deposit.
2. In the Account field, select the account to which the payment is deposited.
3. In the Add funds to this deposit section, enter the following:
   • 1st line RECEIVED FROM: Name of the borrower
   • 1st line ACCOUNT: the loan account in Step 1
   • 1st line AMOUNT: the amount of the first payment
   • 2nd line: use the interest account in Step 2 and enter the amount
4. Click Save and close.

If you want to check the transaction detail of the loan account, simply create a quick report. It shows the transactions of the loaned amount, the repayments, and the running balance.

1. Go to the Gear icon and choose Chart of Accounts.
2. Click the down arrow beside Account history on the loan account.
3. Choose Run report.

Please don't hesitate to visit us back on this thread if you have questions along the way. Take care and have a good one!