diff --git a/erpnext/accounts/doctype/payment_entry/payment_entry.js b/erpnext/accounts/doctype/payment_entry/payment_entry.js
index 26112409b7cb..81ffee3f6e86 100644
--- a/erpnext/accounts/doctype/payment_entry/payment_entry.js
+++ b/erpnext/accounts/doctype/payment_entry/payment_entry.js
@@ -747,6 +747,10 @@ frappe.ui.form.on('Payment Entry', {
 			args["get_orders_to_be_billed"] = true;
 		}
 
+		if (frm.doc.book_advance_payments_in_separate_party_account) {
+			args["book_advance_payments_in_separate_party_account"] = true;
+		}
+
 		frappe.flags.allocate_payment_amount = filters['allocate_payment_amount'];
 
 		return  frappe.call({
diff --git a/erpnext/accounts/doctype/payment_entry/payment_entry.py b/erpnext/accounts/doctype/payment_entry/payment_entry.py
index 11c7c179b67f..052eff393e78 100644
--- a/erpnext/accounts/doctype/payment_entry/payment_entry.py
+++ b/erpnext/accounts/doctype/payment_entry/payment_entry.py
@@ -256,6 +256,7 @@ def validate_allocated_amount_with_latest_data(self):
 					"get_outstanding_invoices": True,
 					"get_orders_to_be_billed": True,
 					"vouchers": vouchers,
+					"book_advance_payments_in_separate_party_account": self.book_advance_payments_in_separate_party_account,
 				},
 				validate=True,
 			)
@@ -1628,11 +1629,16 @@ def get_outstanding_reference_documents(args, validate=False):
 	outstanding_invoices = []
 	negative_outstanding_invoices = []
 
+	if args.get("book_advance_payments_in_separate_party_account"):
+		party_account = get_party_account(args.get("party_type"), args.get("party"), args.get("company"))
+	else:
+		party_account = args.get("party_account")
+
 	if args.get("get_outstanding_invoices"):
 		outstanding_invoices = get_outstanding_invoices(
 			args.get("party_type"),
 			args.get("party"),
-			get_party_account(args.get("party_type"), args.get("party"), args.get("company")),
+			party_account,
 			common_filter=common_filter,
 			posting_date=posting_and_due_date,
 			min_outstanding=args.get("outstanding_amt_greater_than"),