diff --git a/erpnext/controllers/accounts_controller.py b/erpnext/controllers/accounts_controller.py
index f6d4eee518..37548ea9b8 100644
--- a/erpnext/controllers/accounts_controller.py
+++ b/erpnext/controllers/accounts_controller.py
@@ -89,7 +89,7 @@ class AccountsController(TransactionBase):
 		self.validate_currency()
 
 		if self.doctype == 'Purchase Invoice':
-			self.validate_paid_amount()
+			self.calculate_paid_amount()
 
 		if self.doctype in ['Purchase Invoice', 'Sales Invoice']:
 			pos_check_field = "is_pos" if self.doctype=="Sales Invoice" else "is_paid"
@@ -135,22 +135,23 @@ class AccountsController(TransactionBase):
 			else:
 				df.set("print_hide", 1)
 
-	def validate_paid_amount(self):
+	def calculate_paid_amount(self):
 		if hasattr(self, "is_pos") or hasattr(self, "is_paid"):
 			is_paid = self.get("is_pos") or self.get("is_paid")
-			if cint(is_paid) == 1:
-				if flt(self.paid_amount) == 0 and flt(self.outstanding_amount) > 0:
-					if self.cash_bank_account:
-						self.paid_amount = flt(flt(self.outstanding_amount), self.precision("paid_amount"))
-						self.base_paid_amount = flt(self.paid_amount * self.conversion_rate,
-													self.precision("base_paid_amount"))
-					else:
-						# show message that the amount is not paid
-						self.paid_amount = 0
-						frappe.throw(
-							_("Note: Payment Entry will not be created since 'Cash or Bank Account' was not specified"))
-			else:
-				frappe.db.set(self, 'paid_amount', 0)
+
+			if is_paid:
+				if not self.cash_bank_account:
+					# show message that the amount is not paid
+					frappe.throw(_("Note: Payment Entry will not be created since 'Cash or Bank Account' was not specified"))
+					
+				if cint(self.is_return) and self.grand_total > self.paid_amount:
+					self.paid_amount = flt(flt(self.grand_total), self.precision("paid_amount"))
+
+				elif not flt(self.paid_amount) and flt(self.outstanding_amount) > 0:
+					self.paid_amount = flt(flt(self.outstanding_amount), self.precision("paid_amount"))
+
+				self.base_paid_amount = flt(self.paid_amount * self.conversion_rate,
+										self.precision("base_paid_amount"))
 
 	def set_missing_values(self, for_validate=False):
 		if frappe.flags.in_test:
diff --git a/erpnext/controllers/sales_and_purchase_return.py b/erpnext/controllers/sales_and_purchase_return.py
index b713958b1b..859529204b 100644
--- a/erpnext/controllers/sales_and_purchase_return.py
+++ b/erpnext/controllers/sales_and_purchase_return.py
@@ -246,6 +246,8 @@ def make_return_doc(doctype, source_name, target_doc=None):
 			elif doc.doctype == 'Purchase Invoice':
 				doc.paid_amount = -1 * source.paid_amount
 				doc.base_paid_amount = -1 * source.base_paid_amount
+				doc.payment_terms_template = ''
+				doc.payment_schedule = []
 
 		if doc.get("is_return") and hasattr(doc, "packed_items"):
 			for d in doc.get("packed_items"):
diff --git a/erpnext/public/js/controllers/taxes_and_totals.js b/erpnext/public/js/controllers/taxes_and_totals.js
index 7cf2181e42..2ece711040 100644
--- a/erpnext/public/js/controllers/taxes_and_totals.js
+++ b/erpnext/public/js/controllers/taxes_and_totals.js
@@ -44,6 +44,12 @@ erpnext.taxes_and_totals = erpnext.payments.extend({
 			this.calculate_contribution();
 		}
 
+		// Update paid amount on return/debit note creation
+		if(this.frm.doc.doctype === "Purchase Invoice" && this.frm.doc.is_return
+			&& (this.frm.doc.grand_total > this.frm.doc.paid_amount)) {
+			this.frm.doc.paid_amount = flt(this.frm.doc.grand_total, precision("grand_total"));
+		}
+
 		this.frm.refresh_fields();
 	},