diff --git a/erpnext/controllers/accounts_controller.py b/erpnext/controllers/accounts_controller.py
index a5b29114b97..3a3de662d59 100644
--- a/erpnext/controllers/accounts_controller.py
+++ b/erpnext/controllers/accounts_controller.py
@@ -1435,10 +1435,13 @@ class AccountsController(TransactionBase):
 					if d.exchange_gain_loss and (
 						(d.reference_doctype, d.reference_name, str(d.idx)) not in booked
 					):
-						if self.payment_type == "Receive":
-							party_account = self.paid_from
-						elif self.payment_type == "Pay":
-							party_account = self.paid_to
+						if self.book_advance_payments_in_separate_party_account:
+							party_account = d.account
+						else:
+							if self.payment_type == "Receive":
+								party_account = self.paid_from
+							elif self.payment_type == "Pay":
+								party_account = self.paid_to
 
 						dr_or_cr = "debit" if d.exchange_gain_loss > 0 else "credit"