diff --git a/erpnext/accounts/report/financial_statements.py b/erpnext/accounts/report/financial_statements.py
index bb33a0025a..769eb0a57f 100644
--- a/erpnext/accounts/report/financial_statements.py
+++ b/erpnext/accounts/report/financial_statements.py
@@ -406,6 +406,7 @@ def set_gl_entries_by_account(
 				FROM `tabDistributed Cost Center`
 				WHERE cost_center IN %(cost_center)s
 				AND parent NOT IN %(cost_center)s
+				AND is_cancelled = 0
 				GROUP BY parent
 			) as DCC_allocation
 			WHERE company=%(company)s