diff --git a/erpnext/accounts/doctype/payment_entry/payment_entry.json b/erpnext/accounts/doctype/payment_entry/payment_entry.json
index ca02e9dfdef..083171850c4 100644
--- a/erpnext/accounts/doctype/payment_entry/payment_entry.json
+++ b/erpnext/accounts/doctype/payment_entry/payment_entry.json
@@ -790,7 +790,9 @@
    "fetch_from": "company.reconciliation_takes_effect_on",
    "fieldname": "advance_reconciliation_takes_effect_on",
    "fieldtype": "Select",
+   "hidden": 1,
    "label": "Advance Reconciliation Takes Effect On",
+   "no_copy": 1,
    "options": "Advance Payment Date\nOldest Of Invoice Or Advance\nReconciliation Date"
   }
  ],
@@ -805,7 +807,7 @@
    "table_fieldname": "payment_entries"
   }
  ],
- "modified": "2025-01-09 20:02:33.402163",
+ "modified": "2025-01-13 16:03:47.169699",
  "modified_by": "Administrator",
  "module": "Accounts",
  "name": "Payment Entry",
diff --git a/erpnext/accounts/doctype/payment_entry/payment_entry.py b/erpnext/accounts/doctype/payment_entry/payment_entry.py
index aa7c339832b..50c34cf7775 100644
--- a/erpnext/accounts/doctype/payment_entry/payment_entry.py
+++ b/erpnext/accounts/doctype/payment_entry/payment_entry.py
@@ -1507,19 +1507,7 @@ class PaymentEntry(AccountsController):
 			"voucher_detail_no": invoice.name,
 		}
 
-		if self.advance_reconciliation_takes_effect_on == "Advance Payment Date":
-			posting_date = self.posting_date
-		elif self.advance_reconciliation_takes_effect_on == "Oldest Of Invoice Or Advance":
-			date_field = "posting_date"
-			if invoice.reference_doctype in ["Sales Order", "Purchase Order"]:
-				date_field = "transaction_date"
-			posting_date = frappe.db.get_value(invoice.reference_doctype, invoice.reference_name, date_field)
-
-			if getdate(posting_date) < getdate(self.posting_date):
-				posting_date = self.posting_date
-		elif self.advance_reconciliation_takes_effect_on == "Reconciliation Date":
-			posting_date = nowdate()
-
+		posting_date = invoice.reconcile_effect_on
 		dr_or_cr, account = self.get_dr_and_account_for_advances(invoice)
 		args_dict["account"] = account
 		args_dict[dr_or_cr] = self.calculate_base_allocated_amount_for_reference(invoice)
diff --git a/erpnext/accounts/utils.py b/erpnext/accounts/utils.py
index e088580aa48..826371639f0 100644
--- a/erpnext/accounts/utils.py
+++ b/erpnext/accounts/utils.py
@@ -730,6 +730,22 @@ def update_reference_in_payment_entry(
 	}
 	update_advance_paid = []
 
+	# Update Reconciliation effect date in reference
+	if payment_entry.advance_reconciliation_takes_effect_on == "Advance Payment Date":
+		reconcile_on = payment_entry.posting_date
+	elif payment_entry.advance_reconciliation_takes_effect_on == "Oldest Of Invoice Or Advance":
+		date_field = "posting_date"
+		if d.against_voucher_type in ["Sales Order", "Purchase Order"]:
+			date_field = "transaction_date"
+		reconcile_on = frappe.db.get_value(d.against_voucher_type, d.against_voucher, date_field)
+
+		if getdate(reconcile_on) < getdate(payment_entry.posting_date):
+			reconcile_on = payment_entry.posting_date
+	elif payment_entry.advance_reconciliation_takes_effect_on == "Reconciliation Date":
+		reconcile_on = nowdate()
+
+	reference_details.update({"reconcile_effect_on": reconcile_on})
+
 	if d.voucher_detail_no:
 		existing_row = payment_entry.get("references", {"name": d["voucher_detail_no"]})[0]