diff --git a/erpnext/hr/doctype/expense_claim/expense_claim.py b/erpnext/hr/doctype/expense_claim/expense_claim.py
index 9bb31b3ad8..12a3112396 100644
--- a/erpnext/hr/doctype/expense_claim/expense_claim.py
+++ b/erpnext/hr/doctype/expense_claim/expense_claim.py
@@ -47,10 +47,12 @@ class ExpenseClaim(AccountsController):
 		if (
 			# set as paid
 			self.is_paid
-			# grand total is reimbursed
-			or (flt(self.total_sanctioned_amount) > 0 and self.docstatus == 1 and flt(self.grand_total, precision) == flt(self.total_amount_reimbursed, precision))
-			# grand total (to be paid) is 0 since linked advances already cover the claimed amount
-			or (flt(self.grand_total, precision) == 0)
+			or (flt(self.total_sanctioned_amount > 0) and (
+				# grand total is reimbursed
+				(self.docstatus == 1 and flt(self.grand_total, precision) == flt(self.total_amount_reimbursed, precision))
+				# grand total (to be paid) is 0 since linked advances already cover the claimed amount
+				or (flt(self.grand_total, precision) == 0)
+			))
 		) and self.approval_status == "Approved":
 			status = "Paid"
 		elif flt(self.total_sanctioned_amount) > 0 and self.docstatus == 1 and self.approval_status == 'Approved':
diff --git a/erpnext/hr/doctype/expense_claim/test_expense_claim.py b/erpnext/hr/doctype/expense_claim/test_expense_claim.py
index 285717a68d..1244cc4364 100644
--- a/erpnext/hr/doctype/expense_claim/test_expense_claim.py
+++ b/erpnext/hr/doctype/expense_claim/test_expense_claim.py
@@ -72,6 +72,15 @@ class TestExpenseClaim(unittest.TestCase):
 		expense_claim = frappe.get_doc("Expense Claim", expense_claim.name)
 		self.assertEqual(expense_claim.status, "Unpaid")
 
+		# expense claim without any sanctioned amount should not have status as Paid
+		claim = make_expense_claim(payable_account, 1000, 0, "_Test Company", "Travel Expenses - _TC")
+		self.assertEqual(claim.total_sanctioned_amount, 0)
+		self.assertEqual(claim.status, "Submitted")
+
+		# no gl entries created
+		gl_entry = frappe.get_all('GL Entry', {'voucher_type': 'Expense Claim', 'voucher_no': claim.name})
+		self.assertEqual(len(gl_entry), 0)
+
 	def test_expense_claim_against_fully_paid_advances(self):
 		from erpnext.hr.doctype.employee_advance.test_employee_advance import (
 			get_advances_for_claim,
diff --git a/erpnext/patches/v13_0/update_expense_claim_status_for_paid_advances.py b/erpnext/patches/v13_0/update_expense_claim_status_for_paid_advances.py
index 206d032f53..063de1637d 100644
--- a/erpnext/patches/v13_0/update_expense_claim_status_for_paid_advances.py
+++ b/erpnext/patches/v13_0/update_expense_claim_status_for_paid_advances.py
@@ -16,6 +16,7 @@ def execute():
 		.where(
 			((ExpenseClaim.grand_total == 0) | (ExpenseClaim.grand_total == ExpenseClaim.total_amount_reimbursed))
 			& (ExpenseClaim.approval_status == 'Approved')
-			& (ExpenseClaim.docstatus != 2)
+			& (ExpenseClaim.docstatus == 1)
+			& (ExpenseClaim.total_sanctioned_amount > 0)
 		)
 	).run()