How do I reconcile Paypal payments?

Reconcile orders with Paypal payments (via the Xero feed) in the same way that you would do with a bank/credit card payment in Xero feed. When Xero imports Paypal transactions, it is imported as two separate line items: 

1. One has the amount matching your order grand total from Magento, which you can reconcile against the imported order Xero feed 

2. The second has only the Paypal fee component, which you can reconcile against your chosen account (eg. cost of goods sold account).

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