diff --git a/erpnext/accounts/doctype/purchase_invoice/purchase_invoice.py b/erpnext/accounts/doctype/purchase_invoice/purchase_invoice.py
index bdd936a520b..261b26fe316 100644
--- a/erpnext/accounts/doctype/purchase_invoice/purchase_invoice.py
+++ b/erpnext/accounts/doctype/purchase_invoice/purchase_invoice.py
@@ -2097,10 +2097,26 @@ def make_purchase_receipt(source_name, target_doc=None, args=None):
 	if isinstance(args, str):
 		args = json.loads(args)
 
+	def post_parent_process(source_parent, target_parent):
+		for row in target_parent.get("items"):
+			if row.get("qty") == 0:
+				target_parent.remove(row)
+
 	def update_item(obj, target, source_parent):
-		target.qty = flt(obj.qty) - flt(obj.received_qty)
+		from erpnext.controllers.sales_and_purchase_return import get_returned_qty_map_for_row
+
+		returned_qty_map = (
+			get_returned_qty_map_for_row(
+				source_parent.name, source_parent.supplier, obj.name, "Purchase Invoice"
+			)
+			or {}
+		)
+
+		target.qty = flt(obj.qty) - flt(obj.received_qty) - flt(returned_qty_map.get("qty"))
 		target.received_qty = flt(obj.qty) - flt(obj.received_qty)
-		target.stock_qty = (flt(obj.qty) - flt(obj.received_qty)) * flt(obj.conversion_factor)
+		target.stock_qty = (flt(obj.qty) - flt(obj.received_qty) - flt(returned_qty_map.get("qty"))) * flt(
+			obj.conversion_factor
+		)
 		target.amount = (flt(obj.qty) - flt(obj.received_qty)) * flt(obj.rate)
 		target.base_amount = (
 			(flt(obj.qty) - flt(obj.received_qty)) * flt(obj.rate) * flt(source_parent.conversion_rate)
@@ -2139,6 +2155,7 @@ def make_purchase_receipt(source_name, target_doc=None, args=None):
 			"Purchase Taxes and Charges": {"doctype": "Purchase Taxes and Charges"},
 		},
 		target_doc,
+		post_parent_process,
 	)
 
 	return doc
diff --git a/erpnext/accounts/doctype/purchase_invoice/test_purchase_invoice.py b/erpnext/accounts/doctype/purchase_invoice/test_purchase_invoice.py
index c6324c10373..5bd7e80f188 100644
--- a/erpnext/accounts/doctype/purchase_invoice/test_purchase_invoice.py
+++ b/erpnext/accounts/doctype/purchase_invoice/test_purchase_invoice.py
@@ -2931,6 +2931,29 @@ class TestPurchaseInvoice(IntegrationTestCase, StockTestMixin):
 		pi.save()
 		self.assertEqual(pi.discount_amount, discount_amount)
 
+	def test_returned_item_purchase_receipt(self):
+		from erpnext.accounts.doctype.purchase_invoice.purchase_invoice import (
+			make_purchase_receipt as make_purchase_receipt_from_pi,
+		)
+
+		item = create_item("_Test Returned Item Purchase Receipt", is_stock_item=1)
+
+		pi = make_purchase_invoice(item_code=item.name, qty=5, rate=100)
+
+		return_pi = make_purchase_invoice(
+			item_code=item.name,
+			is_return=1,
+			return_against=pi.name,
+			qty=-5,
+			do_not_submit=True,
+		)
+
+		return_pi.items[0].purchase_invoice_item = pi.items[0].name
+		return_pi.submit()
+
+		pr = make_purchase_receipt_from_pi(pi.name)
+		self.assertFalse(pr.items)
+
 
 def set_advance_flag(company, flag, default_account):
 	frappe.db.set_value(