Hello,
when you create a financial transaction, basically the transaction amount will be in two currencies. One is document currency and another is local currency. When you pass any transaction in local currency, you will see both the field has equal amount appearing. However when you pass a transaction in foreign currency say USD 1000, you will see your document currency is appearing as 1000 USD however the local currency is appearing in converted INR amount.
This conversion is carried out basis on how you maintain the forex rates in your forex table. You can check the below path
SPRO-IMG-SAP Netweaver-General Settings-Currencies-Enter Exchange Rates
There are many more to this like type of Rates which could be in M,G,B etc. You need to explore it further.
best regds
Subha