diff --git a/fineract-provider/src/main/java/org/apache/fineract/accounting/journalentry/data/LoanDTO.java b/fineract-provider/src/main/java/org/apache/fineract/accounting/journalentry/data/LoanDTO.java
index 60b50dc806c..e78b3f89b9f 100755
--- a/fineract-provider/src/main/java/org/apache/fineract/accounting/journalentry/data/LoanDTO.java
+++ b/fineract-provider/src/main/java/org/apache/fineract/accounting/journalentry/data/LoanDTO.java
@@ -18,6 +18,7 @@
  */
 package org.apache.fineract.accounting.journalentry.data;
 
+import java.math.BigDecimal;
 import java.util.List;
 import lombok.AllArgsConstructor;
 import lombok.Getter;
@@ -45,4 +46,6 @@ public class LoanDTO {
     private boolean markedAsChargeOff;
     @Setter
     private boolean markedAsFraud;
+    @Setter
+    private BigDecimal overpaidAmount;
 }
diff --git a/fineract-provider/src/main/java/org/apache/fineract/accounting/journalentry/service/AccountingProcessorHelper.java b/fineract-provider/src/main/java/org/apache/fineract/accounting/journalentry/service/AccountingProcessorHelper.java
index fec88b4f4df..33956565a37 100644
--- a/fineract-provider/src/main/java/org/apache/fineract/accounting/journalentry/service/AccountingProcessorHelper.java
+++ b/fineract-provider/src/main/java/org/apache/fineract/accounting/journalentry/service/AccountingProcessorHelper.java
@@ -110,6 +110,7 @@ public LoanDTO populateLoanDtoFromMap(final Map<String, Object> accountingBridge
         boolean isAccountTransfer = (Boolean) accountingBridgeData.get("isAccountTransfer");
         boolean isLoanMarkedAsChargeOff = (Boolean) accountingBridgeData.get("isChargeOff");
         boolean isLoanMarkedAsFraud = (Boolean) accountingBridgeData.get("isFraud");
+        BigDecimal overpaidAmount = (BigDecimal) accountingBridgeData.get("overpaidAmount");
 
         @SuppressWarnings("unchecked")
         final List<Map<String, Object>> newTransactionsMap = (List<Map<String, Object>>) accountingBridgeData.get("newLoanTransactions");
@@ -164,7 +165,7 @@ public LoanDTO populateLoanDtoFromMap(final Map<String, Object> accountingBridge
         }
 
         return new LoanDTO(loanId, loanProductId, officeId, currencyCode, cashBasedAccountingEnabled, upfrontAccrualBasedAccountingEnabled,
-                periodicAccrualBasedAccountingEnabled, newLoanTransactions, isLoanMarkedAsChargeOff, isLoanMarkedAsFraud);
+                periodicAccrualBasedAccountingEnabled, newLoanTransactions, isLoanMarkedAsChargeOff, isLoanMarkedAsFraud, overpaidAmount);
     }
 
     public SavingsDTO populateSavingsDtoFromMap(final Map<String, Object> accountingBridgeData, final boolean cashBasedAccountingEnabled,
@@ -786,7 +787,7 @@ public Office getOfficeById(final long officeId) {
         return this.officeRepository.getReferenceById(officeId);
     }
 
-    private void createCreditJournalEntryOrReversalForLoan(final Office office, final String currencyCode, final int accountMappingTypeId,
+    public void createCreditJournalEntryOrReversalForLoan(final Office office, final String currencyCode, final int accountMappingTypeId,
             final Long loanProductId, final Long paymentTypeId, final Long loanId, final String transactionId,
             final LocalDate transactionDate, final BigDecimal amount, final Boolean isReversal) {
         final GLAccount account = getLinkedGLAccountForLoanProduct(loanProductId, accountMappingTypeId, paymentTypeId);
diff --git a/fineract-provider/src/main/java/org/apache/fineract/accounting/journalentry/service/AccrualBasedAccountingProcessorForLoan.java b/fineract-provider/src/main/java/org/apache/fineract/accounting/journalentry/service/AccrualBasedAccountingProcessorForLoan.java
index 690672d1d11..1b5c167a0a6 100644
--- a/fineract-provider/src/main/java/org/apache/fineract/accounting/journalentry/service/AccrualBasedAccountingProcessorForLoan.java
+++ b/fineract-provider/src/main/java/org/apache/fineract/accounting/journalentry/service/AccrualBasedAccountingProcessorForLoan.java
@@ -418,6 +418,7 @@ private void createJournalEntriesForChargeback(LoanDTO loanDTO, LoanTransactionD
         final Long loanProductId = loanDTO.getLoanProductId();
         final Long loanId = loanDTO.getLoanId();
         final String currencyCode = loanDTO.getCurrencyCode();
+        final BigDecimal overpaidAmount = loanDTO.getOverpaidAmount();
 
         // transaction properties
         final String transactionId = loanTransactionDTO.getTransactionId();
@@ -426,9 +427,24 @@ private void createJournalEntriesForChargeback(LoanDTO loanDTO, LoanTransactionD
         final boolean isReversal = loanTransactionDTO.isReversed();
         final Long paymentTypeId = loanTransactionDTO.getPaymentTypeId();
 
-        this.helper.createJournalEntriesAndReversalsForLoan(office, currencyCode, AccrualAccountsForLoan.LOAN_PORTFOLIO.getValue(),
-                AccrualAccountsForLoan.FUND_SOURCE.getValue(), loanProductId, paymentTypeId, loanId, transactionId, transactionDate, amount,
-                isReversal);
+        if (BigDecimal.ZERO.compareTo(overpaidAmount) == 0) {
+            helper.createJournalEntriesAndReversalsForLoan(office, currencyCode, AccrualAccountsForLoan.LOAN_PORTFOLIO.getValue(),
+                    AccrualAccountsForLoan.FUND_SOURCE.getValue(), loanProductId, paymentTypeId, loanId, transactionId, transactionDate,
+                    amount, isReversal);
+        } else if (overpaidAmount.compareTo(amount) > 0) {
+            helper.createJournalEntriesAndReversalsForLoan(office, currencyCode, AccrualAccountsForLoan.OVERPAYMENT.getValue(),
+                    AccrualAccountsForLoan.FUND_SOURCE.getValue(), loanProductId, paymentTypeId, loanId, transactionId, transactionDate,
+                    amount, isReversal);
+        } else {
+            BigDecimal diff = amount.subtract(overpaidAmount);
+            helper.createDebitJournalEntryOrReversalForLoan(office, currencyCode, AccrualAccountsForLoan.LOAN_PORTFOLIO.getValue(),
+                    loanProductId, paymentTypeId, loanId, transactionId, transactionDate, diff, isReversal);
+            helper.createCreditJournalEntryOrReversalForLoan(office, currencyCode, AccrualAccountsForLoan.FUND_SOURCE.getValue(),
+                    loanProductId, paymentTypeId, loanId, transactionId, transactionDate, amount, isReversal);
+            helper.createDebitJournalEntryOrReversalForLoan(office, currencyCode, AccrualAccountsForLoan.OVERPAYMENT.getValue(),
+                    loanProductId, paymentTypeId, loanId, transactionId, transactionDate, overpaidAmount, isReversal);
+        }
+
     }
 
     /**
diff --git a/fineract-provider/src/main/java/org/apache/fineract/portfolio/loanaccount/domain/Loan.java b/fineract-provider/src/main/java/org/apache/fineract/portfolio/loanaccount/domain/Loan.java
index e56edebdf98..cf366b18cc2 100644
--- a/fineract-provider/src/main/java/org/apache/fineract/portfolio/loanaccount/domain/Loan.java
+++ b/fineract-provider/src/main/java/org/apache/fineract/portfolio/loanaccount/domain/Loan.java
@@ -4492,6 +4492,7 @@ public Map<String, Object> deriveAccountingBridgeData(final String currencyCode,
         accountingBridgeData.put("isAccountTransfer", isAccountTransfer);
         accountingBridgeData.put("isChargeOff", isChargedOff());
         accountingBridgeData.put("isFraud", isFraud());
+        accountingBridgeData.put("overpaidAmount", calculateTotalOverpayment().getAmount().abs());
 
         final List<Map<String, Object>> newLoanTransactions = new ArrayList<>();
         for (final LoanTransaction transaction : this.loanTransactions) {