diff --git a/erpnext/stock/doctype/purchase_receipt/purchase_receipt.py b/erpnext/stock/doctype/purchase_receipt/purchase_receipt.py
index 00145ffa47c..681314dbd5f 100644
--- a/erpnext/stock/doctype/purchase_receipt/purchase_receipt.py
+++ b/erpnext/stock/doctype/purchase_receipt/purchase_receipt.py
@@ -1138,10 +1138,14 @@ def update_billing_percentage(pr_doc, update_modified=True, adjust_incoming_rate
 		returned_qty = flt(item_wise_returned_qty.get(item.name))
 		returned_amount = flt(returned_qty) * flt(item.rate)
 		pending_amount = flt(item.amount) - returned_amount
-		if buying_settings.bill_for_rejected_quantity_in_purchase_invoice:
-			pending_amount = flt(item.amount)
 
-		total_billable_amount = abs(flt(item.amount))
+		# When rejected qty is billable, its value is part of the billable base too
+		rejected_amount = 0.0
+		if buying_settings.bill_for_rejected_quantity_in_purchase_invoice:
+			rejected_amount = flt(item.rejected_qty * item.rate, item.precision("amount"))
+			pending_amount = flt(item.amount) + rejected_amount
+
+		total_billable_amount = abs(flt(item.amount) + rejected_amount)
 		if pending_amount > 0:
 			total_billable_amount = pending_amount if item.billed_amt <= pending_amount else item.billed_amt
 
@@ -1151,9 +1155,7 @@ def update_billing_percentage(pr_doc, update_modified=True, adjust_incoming_rate
 		if pr_doc.get("is_return") and not total_amount and total_billed_amount:
 			total_amount = total_billed_amount
 
-		amount = item.amount
-		if frappe.db.get_single_value("Buying Settings", "bill_for_rejected_quantity_in_purchase_invoice"):
-			amount += flt(item.rejected_qty * item.rate, item.precision("amount"))
+		amount = flt(item.amount) + rejected_amount
 
 		if adjust_incoming_rate:
 			adjusted_amt = 0.0
diff --git a/erpnext/stock/doctype/purchase_receipt/test_purchase_receipt.py b/erpnext/stock/doctype/purchase_receipt/test_purchase_receipt.py
index f30158b4f51..d8bb216a430 100644
--- a/erpnext/stock/doctype/purchase_receipt/test_purchase_receipt.py
+++ b/erpnext/stock/doctype/purchase_receipt/test_purchase_receipt.py
@@ -605,6 +605,42 @@ class TestPurchaseReceipt(FrappeTestCase):
 		return_pr.cancel()
 		pr.cancel()
 
+	def test_per_billed_for_fully_rejected_receipt(self):
+		from erpnext.stock.doctype.purchase_receipt.purchase_receipt import update_billing_percentage
+
+		bill_rejected = frappe.db.get_single_value(
+			"Buying Settings", "bill_for_rejected_quantity_in_purchase_invoice"
+		)
+		frappe.db.set_single_value("Buying Settings", "bill_for_rejected_quantity_in_purchase_invoice", 1)
+
+		try:
+			# Fully rejected receipt: accepted qty 0, whole qty in rejected warehouse
+			pr = make_purchase_receipt(
+				received_qty=10,
+				qty=0,
+				rejected_qty=10,
+				rate=9.5,
+				rejected_warehouse="_Test Warehouse 1 - _TC",
+				do_not_save=True,
+			)
+			pr.items[0].warehouse = ""
+			pr.submit()
+
+			# Bill the rejected qty (10 x 9.5) directly against the receipt item
+			pr.items[0].db_set("billed_amt", 95)
+			update_billing_percentage(pr)
+
+			pr.load_from_db()
+			# Billing the rejected qty must not push per_billed above 100
+			self.assertEqual(pr.per_billed, 100)
+			self.assertEqual(pr.status, "Completed")
+
+			pr.cancel()
+		finally:
+			frappe.db.set_single_value(
+				"Buying Settings", "bill_for_rejected_quantity_in_purchase_invoice", bill_rejected
+			)
+
 	def test_purchase_receipt_for_rejected_gle_without_accepted_warehouse(self):
 		from erpnext.stock.doctype.warehouse.test_warehouse import get_warehouse