Recording capitalized interest for loan on payment deferral

Okay, what you have is interest that is charged but unpaid. Normally you might only enter interest as an expense when you cut a check for the loan payment not fully posting the interest as a separate bill, but here is how the banks look at it:

Monthly when your statement date rolls around interest is charged and added to your balance ee though you do not see it, then your p&i payment reduces both principal and interest. 

With deferred interest, the interest is charged and added to your balance just the same. For your deferral of interest enter bills for the interest amount, payable to the lender, but do not add it to the actual loan principal unless you refinance or reamortize. If you are cash basis you won't deduct the interest until you pay it but if accrual the accrued interest billed is a current expense.

When you start paying again payments will be first applied to back and current interest before any monies are applied to principal, that is one reason to keep the interest added as a separate item.