diff --git a/erpnext/accounts/utils.py b/erpnext/accounts/utils.py
index 0450221222d..e462f749b54 100644
--- a/erpnext/accounts/utils.py
+++ b/erpnext/accounts/utils.py
@@ -781,6 +781,46 @@ def cancel_exchange_gain_loss_journal(
 					gain_loss_je.cancel()
 
 
+def cancel_common_party_journal(self):
+	if self.doctype not in ["Sales Invoice", "Purchase Invoice"]:
+		return
+
+	if not frappe.db.get_single_value("Accounts Settings", "enable_common_party_accounting"):
+		return
+
+	party_link = self.get_common_party_link()
+	if not party_link:
+		return
+
+	journal_entry = frappe.db.get_value(
+		"Journal Entry Account",
+		filters={
+			"reference_type": self.doctype,
+			"reference_name": self.name,
+			"docstatus": 1,
+		},
+		fieldname="parent",
+	)
+
+	if not journal_entry:
+		return
+
+	common_party_journal = frappe.db.get_value(
+		"Journal Entry",
+		filters={
+			"name": journal_entry,
+			"is_system_generated": True,
+			"docstatus": 1,
+		},
+	)
+
+	if not common_party_journal:
+		return
+
+	common_party_je = frappe.get_doc("Journal Entry", common_party_journal)
+	common_party_je.cancel()
+
+
 def update_accounting_ledgers_after_reference_removal(
 	ref_type: str | None = None, ref_no: str | None = None, payment_name: str | None = None
 ):
diff --git a/erpnext/controllers/accounts_controller.py b/erpnext/controllers/accounts_controller.py
index ce5d813b801..fbd717db153 100644
--- a/erpnext/controllers/accounts_controller.py
+++ b/erpnext/controllers/accounts_controller.py
@@ -1580,6 +1580,7 @@ class AccountsController(TransactionBase):
 			remove_from_bank_transaction,
 		)
 		from erpnext.accounts.utils import (
+			cancel_common_party_journal,
 			cancel_exchange_gain_loss_journal,
 			unlink_ref_doc_from_payment_entries,
 		)
@@ -1591,6 +1592,7 @@ class AccountsController(TransactionBase):
 
 			# Cancel Exchange Gain/Loss Journal before unlinking
 			cancel_exchange_gain_loss_journal(self)
+			cancel_common_party_journal(self)
 
 			if frappe.db.get_single_value("Accounts Settings", "unlink_payment_on_cancellation_of_invoice"):
 				unlink_ref_doc_from_payment_entries(self)
@@ -2424,6 +2426,7 @@ class AccountsController(TransactionBase):
 		jv.posting_date = self.posting_date
 		jv.company = self.company
 		jv.remark = f"Adjustment for {self.doctype} {self.name}"
+		jv.is_system_generated = True
 
 		reconcilation_entry = frappe._dict()
 		advance_entry = frappe._dict()