diff --git a/erpnext/__init__.py b/erpnext/__init__.py
index 6b8704609b3..d6dab05fea9 100644
--- a/erpnext/__init__.py
+++ b/erpnext/__init__.py
@@ -5,7 +5,7 @@ import frappe
 from erpnext.hooks import regional_overrides
 from frappe.utils import getdate
 
-__version__ = '10.1.39'
+__version__ = '10.1.40'
 
 def get_default_company(user=None):
 	'''Get default company for user'''
diff --git a/erpnext/accounts/doctype/payment_entry/payment_entry.js b/erpnext/accounts/doctype/payment_entry/payment_entry.js
index daaf24f6b23..159fb4c08b4 100644
--- a/erpnext/accounts/doctype/payment_entry/payment_entry.js
+++ b/erpnext/accounts/doctype/payment_entry/payment_entry.js
@@ -828,6 +828,11 @@ frappe.ui.form.on('Payment Entry Reference', {
 					$.each(r.message, function(field, value) {
 						frappe.model.set_value(cdt, cdn, field, value);
 					})
+
+					let allocated_amount = frm.doc.unallocated_amount > row.outstanding_amount ?
+						row.outstanding_amount : frm.doc.unallocated_amount;
+
+					frappe.model.set_value(cdt, cdn, 'allocated_amount', allocated_amount);
 					frm.refresh_fields();
 				}
 			}
diff --git a/erpnext/accounts/doctype/payment_entry/payment_entry.py b/erpnext/accounts/doctype/payment_entry/payment_entry.py
index db2db722dca..c981d0898a5 100644
--- a/erpnext/accounts/doctype/payment_entry/payment_entry.py
+++ b/erpnext/accounts/doctype/payment_entry/payment_entry.py
@@ -748,8 +748,11 @@ def get_reference_details(reference_doctype, reference_name, party_account_curre
 			exchange_rate = ref_doc.get("conversion_rate") or \
 				get_exchange_rate(party_account_currency, company_currency, ref_doc.posting_date)
 
-		if reference_doctype in ("Sales Invoice", "Purchase Invoice", "Expense Claim"):
+		if reference_doctype in ("Sales Invoice", "Purchase Invoice"):
 			outstanding_amount = ref_doc.get("outstanding_amount")
+		elif reference_doctype == "Expense Claim":
+			outstanding_amount = flt(ref_doc.get("total_sanctioned_amount")) \
+				- flt(ref_doc.get("total_amount+reimbursed")) - flt(ref_doc.get("total_advance_amount"))
 		elif reference_doctype == "Employee Advance":
 			outstanding_amount = ref_doc.advance_amount - flt(ref_doc.paid_amount)
 		else: