Payables creates journal entries in the transaction currency and your ledger currency for all invoices and payments. Payables continues to record gains and losses in the Gain/Loss Accounts you assign. When you pay invoices in a different currency than the payment currency, Payables uses the Rounding account that you define in the Currencies region of the Payables Options window to record the rounding error.
For example, Your ledger currency is FRF and you enter an invoice in 1000 FRF and enter EUR as the Payment Currency. The Payment Amount converts to 152.53917 EUR, at the fixed conversion rate of 6.555693, and rounds to 152.54 EUR. The payment, converted back to your ledger currency is 1000.0054, which rounds to 1000.01. The .01 FRF difference is recorded in the Rounding account. The following shows the accounting entries for the previously described example.
Invoice Accounting
Item Expense -----------1000 Dr--------FRF
Liability------------------1000 Cr---------FRF
Payment Accounting:(Paid in EUR)
Liability-----------------1000.01 Dr----FRF
Cash--------------------152.54 Cr------EUR
Liability------------------0.01 Cr---------FRF
Rounding A/C-----------0.01 Dr---------FRF
