diff --git a/erpnext/buying/doctype/purchase_order/purchase_order.py b/erpnext/buying/doctype/purchase_order/purchase_order.py
index 0386830..6522a34 100644
--- a/erpnext/buying/doctype/purchase_order/purchase_order.py
+++ b/erpnext/buying/doctype/purchase_order/purchase_order.py
@@ -202,6 +202,9 @@
 		if self.has_drop_ship_item():
 			self.update_delivered_qty_in_sales_order()
 
+		if self.is_subcontracted == "Yes":
+			self.update_reserved_qty_for_subcontract()
+
 		self.check_for_closed_status()
 
 		frappe.db.set(self,'status','Cancelled')
@@ -252,15 +255,10 @@
 				item.received_qty = item.qty
 
 	def update_reserved_qty_for_subcontract(self):
-		items = list(set([d.rm_item_code for d in self.get("supplied_items")]))
-		item_wh = frappe._dict(frappe.db.sql("""select item_code, default_warehouse
-			from `tabItem` where name in ({0})""".format(", ".join(["%s"] * len(items))), items))
-
 		for d in self.supplied_items:
 			if d.rm_item_code:
-				warehouse = item_wh.get(d.rm_item_code)
-				stock_bin = get_bin(d.rm_item_code, warehouse)
-				stock_bin.update_reserved_qty_for_sub_contracting(self.name, transferred_qty=0, transaction_type = "Reserve")
+				stock_bin = get_bin(d.rm_item_code, d.reserve_warehouse)
+				stock_bin.update_reserved_qty_for_sub_contracting()
 
 @frappe.whitelist()
 def close_or_unclose_purchase_orders(names, status):
diff --git a/erpnext/buying/doctype/purchase_order_item_supplied/purchase_order_item_supplied.json b/erpnext/buying/doctype/purchase_order_item_supplied/purchase_order_item_supplied.json
index 4a87037..1bcf5e4 100644
--- a/erpnext/buying/doctype/purchase_order_item_supplied/purchase_order_item_supplied.json
+++ b/erpnext/buying/doctype/purchase_order_item_supplied/purchase_order_item_supplied.json
@@ -1,5 +1,6 @@
 {
  "allow_copy": 0, 
+ "allow_guest_to_view": 0, 
  "allow_import": 0, 
  "allow_rename": 0, 
  "beta": 0, 
@@ -10,16 +11,20 @@
  "editable_grid": 1, 
  "fields": [
   {
+   "allow_bulk_edit": 0, 
    "allow_on_submit": 0, 
    "bold": 0, 
    "collapsible": 0, 
+   "columns": 0, 
    "fieldname": "main_item_code", 
    "fieldtype": "Data", 
    "hidden": 0, 
    "ignore_user_permissions": 0, 
    "ignore_xss_filter": 0, 
    "in_filter": 0, 
+   "in_global_search": 0, 
    "in_list_view": 1, 
+   "in_standard_filter": 0, 
    "label": "Item Code", 
    "length": 0, 
    "no_copy": 0, 
@@ -29,6 +34,7 @@
    "print_hide": 0, 
    "print_hide_if_no_value": 0, 
    "read_only": 1, 
+   "remember_last_selected_value": 0, 
    "report_hide": 0, 
    "reqd": 0, 
    "search_index": 0, 
@@ -36,16 +42,20 @@
    "unique": 0
   }, 
   {
+   "allow_bulk_edit": 0, 
    "allow_on_submit": 0, 
    "bold": 0, 
    "collapsible": 0, 
+   "columns": 0, 
    "fieldname": "rm_item_code", 
    "fieldtype": "Data", 
    "hidden": 0, 
    "ignore_user_permissions": 0, 
    "ignore_xss_filter": 0, 
    "in_filter": 0, 
+   "in_global_search": 0, 
    "in_list_view": 1, 
+   "in_standard_filter": 0, 
    "label": "Raw Material Item Code", 
    "length": 0, 
    "no_copy": 0, 
@@ -55,6 +65,7 @@
    "print_hide": 0, 
    "print_hide_if_no_value": 0, 
    "read_only": 1, 
+   "remember_last_selected_value": 0, 
    "report_hide": 0, 
    "reqd": 0, 
    "search_index": 0, 
@@ -62,16 +73,20 @@
    "unique": 0
   }, 
   {
+   "allow_bulk_edit": 0, 
    "allow_on_submit": 0, 
    "bold": 0, 
    "collapsible": 0, 
+   "columns": 0, 
    "fieldname": "required_qty", 
    "fieldtype": "Float", 
    "hidden": 0, 
    "ignore_user_permissions": 0, 
    "ignore_xss_filter": 0, 
    "in_filter": 0, 
+   "in_global_search": 0, 
    "in_list_view": 1, 
+   "in_standard_filter": 0, 
    "label": "Supplied Qty", 
    "length": 0, 
    "no_copy": 0, 
@@ -81,6 +96,7 @@
    "print_hide": 0, 
    "print_hide_if_no_value": 0, 
    "read_only": 1, 
+   "remember_last_selected_value": 0, 
    "report_hide": 0, 
    "reqd": 0, 
    "search_index": 0, 
@@ -88,16 +104,20 @@
    "unique": 0
   }, 
   {
+   "allow_bulk_edit": 0, 
    "allow_on_submit": 0, 
    "bold": 0, 
    "collapsible": 0, 
+   "columns": 0, 
    "fieldname": "rate", 
    "fieldtype": "Currency", 
    "hidden": 0, 
    "ignore_user_permissions": 0, 
    "ignore_xss_filter": 0, 
    "in_filter": 0, 
+   "in_global_search": 0, 
    "in_list_view": 1, 
+   "in_standard_filter": 0, 
    "label": "Rate", 
    "length": 0, 
    "no_copy": 0, 
@@ -108,6 +128,7 @@
    "print_hide": 0, 
    "print_hide_if_no_value": 0, 
    "read_only": 0, 
+   "remember_last_selected_value": 0, 
    "report_hide": 0, 
    "reqd": 0, 
    "search_index": 0, 
@@ -115,16 +136,20 @@
    "unique": 0
   }, 
   {
+   "allow_bulk_edit": 0, 
    "allow_on_submit": 0, 
    "bold": 0, 
    "collapsible": 0, 
+   "columns": 0, 
    "fieldname": "amount", 
    "fieldtype": "Currency", 
    "hidden": 0, 
    "ignore_user_permissions": 0, 
    "ignore_xss_filter": 0, 
    "in_filter": 0, 
+   "in_global_search": 0, 
    "in_list_view": 0, 
+   "in_standard_filter": 0, 
    "label": "Amount", 
    "length": 0, 
    "no_copy": 0, 
@@ -135,6 +160,7 @@
    "print_hide": 0, 
    "print_hide_if_no_value": 0, 
    "read_only": 1, 
+   "remember_last_selected_value": 0, 
    "report_hide": 0, 
    "reqd": 0, 
    "search_index": 0, 
@@ -142,16 +168,49 @@
    "unique": 0
   }, 
   {
+   "allow_bulk_edit": 0, 
    "allow_on_submit": 0, 
    "bold": 0, 
    "collapsible": 0, 
+   "columns": 0, 
+   "fieldname": "column_break_6", 
+   "fieldtype": "Column Break", 
+   "hidden": 0, 
+   "ignore_user_permissions": 0, 
+   "ignore_xss_filter": 0, 
+   "in_filter": 0, 
+   "in_global_search": 0, 
+   "in_list_view": 0, 
+   "in_standard_filter": 0, 
+   "length": 0, 
+   "no_copy": 0, 
+   "permlevel": 0, 
+   "precision": "", 
+   "print_hide": 0, 
+   "print_hide_if_no_value": 0, 
+   "read_only": 0, 
+   "remember_last_selected_value": 0, 
+   "report_hide": 0, 
+   "reqd": 0, 
+   "search_index": 0, 
+   "set_only_once": 0, 
+   "unique": 0
+  }, 
+  {
+   "allow_bulk_edit": 0, 
+   "allow_on_submit": 0, 
+   "bold": 0, 
+   "collapsible": 0, 
+   "columns": 0, 
    "fieldname": "bom_detail_no", 
    "fieldtype": "Data", 
    "hidden": 0, 
    "ignore_user_permissions": 0, 
    "ignore_xss_filter": 0, 
    "in_filter": 0, 
+   "in_global_search": 0, 
    "in_list_view": 1, 
+   "in_standard_filter": 0, 
    "label": "BOM Detail No", 
    "length": 0, 
    "no_copy": 0, 
@@ -161,6 +220,7 @@
    "print_hide": 0, 
    "print_hide_if_no_value": 0, 
    "read_only": 1, 
+   "remember_last_selected_value": 0, 
    "report_hide": 0, 
    "reqd": 0, 
    "search_index": 0, 
@@ -168,16 +228,20 @@
    "unique": 0
   }, 
   {
+   "allow_bulk_edit": 0, 
    "allow_on_submit": 0, 
    "bold": 0, 
    "collapsible": 0, 
+   "columns": 0, 
    "fieldname": "reference_name", 
    "fieldtype": "Data", 
    "hidden": 0, 
    "ignore_user_permissions": 0, 
    "ignore_xss_filter": 0, 
    "in_filter": 0, 
+   "in_global_search": 0, 
    "in_list_view": 1, 
+   "in_standard_filter": 0, 
    "label": "Reference Name", 
    "length": 0, 
    "no_copy": 0, 
@@ -187,6 +251,7 @@
    "print_hide": 0, 
    "print_hide_if_no_value": 0, 
    "read_only": 1, 
+   "remember_last_selected_value": 0, 
    "report_hide": 0, 
    "reqd": 0, 
    "search_index": 0, 
@@ -194,16 +259,20 @@
    "unique": 0
   }, 
   {
+   "allow_bulk_edit": 0, 
    "allow_on_submit": 0, 
    "bold": 0, 
    "collapsible": 0, 
+   "columns": 0, 
    "fieldname": "conversion_factor", 
    "fieldtype": "Float", 
    "hidden": 1, 
    "ignore_user_permissions": 0, 
    "ignore_xss_filter": 0, 
    "in_filter": 0, 
+   "in_global_search": 0, 
    "in_list_view": 0, 
+   "in_standard_filter": 0, 
    "label": "Conversion Factor", 
    "length": 0, 
    "no_copy": 0, 
@@ -213,6 +282,7 @@
    "print_hide": 0, 
    "print_hide_if_no_value": 0, 
    "read_only": 1, 
+   "remember_last_selected_value": 0, 
    "report_hide": 0, 
    "reqd": 0, 
    "search_index": 0, 
@@ -220,16 +290,20 @@
    "unique": 0
   }, 
   {
+   "allow_bulk_edit": 0, 
    "allow_on_submit": 0, 
    "bold": 0, 
    "collapsible": 0, 
+   "columns": 0, 
    "fieldname": "stock_uom", 
    "fieldtype": "Link", 
    "hidden": 0, 
    "ignore_user_permissions": 0, 
    "ignore_xss_filter": 0, 
    "in_filter": 0, 
+   "in_global_search": 0, 
    "in_list_view": 0, 
+   "in_standard_filter": 0, 
    "label": "Stock Uom", 
    "length": 0, 
    "no_copy": 0, 
@@ -240,6 +314,39 @@
    "print_hide": 0, 
    "print_hide_if_no_value": 0, 
    "read_only": 1, 
+   "remember_last_selected_value": 0, 
+   "report_hide": 0, 
+   "reqd": 0, 
+   "search_index": 0, 
+   "set_only_once": 0, 
+   "unique": 0
+  }, 
+  {
+   "allow_bulk_edit": 0, 
+   "allow_on_submit": 0, 
+   "bold": 0, 
+   "collapsible": 0, 
+   "columns": 0, 
+   "default": "", 
+   "fieldname": "reserve_warehouse", 
+   "fieldtype": "Link", 
+   "hidden": 0, 
+   "ignore_user_permissions": 0, 
+   "ignore_xss_filter": 0, 
+   "in_filter": 0, 
+   "in_global_search": 0, 
+   "in_list_view": 0, 
+   "in_standard_filter": 0, 
+   "label": "Reserve Warehouse", 
+   "length": 0, 
+   "no_copy": 0, 
+   "options": "Warehouse", 
+   "permlevel": 0, 
+   "precision": "", 
+   "print_hide": 0, 
+   "print_hide_if_no_value": 0, 
+   "read_only": 0, 
+   "remember_last_selected_value": 0, 
    "report_hide": 0, 
    "reqd": 0, 
    "search_index": 0, 
@@ -247,17 +354,17 @@
    "unique": 0
   }
  ], 
+ "has_web_view": 0, 
  "hide_heading": 0, 
  "hide_toolbar": 1, 
  "idx": 1, 
  "image_view": 0, 
  "in_create": 0, 
- "in_dialog": 0, 
  "is_submittable": 0, 
  "issingle": 0, 
  "istable": 1, 
  "max_attachments": 0, 
- "modified": "2016-07-11 03:28:05.533063", 
+ "modified": "2017-11-29 08:51:08.362463", 
  "modified_by": "Administrator", 
  "module": "Buying", 
  "name": "Purchase Order Item Supplied", 
@@ -266,5 +373,7 @@
  "quick_entry": 0, 
  "read_only": 0, 
  "read_only_onload": 0, 
+ "show_name_in_global_search": 0, 
+ "track_changes": 0, 
  "track_seen": 0
 }
\ No newline at end of file
diff --git a/erpnext/controllers/buying_controller.py b/erpnext/controllers/buying_controller.py
index a31db64..5f762d5 100644
--- a/erpnext/controllers/buying_controller.py
+++ b/erpnext/controllers/buying_controller.py
@@ -160,6 +160,10 @@
 				if item in self.sub_contracted_items and not item.bom:
 					frappe.throw(_("Please select BOM in BOM field for Item {0}").format(item.item_code))
 
+			for supplied_item in self.get("supplied_items"):
+				if not supplied_item.reserve_warehouse:
+					frappe.throw(_("Reserved Warehouse is mandatory for Item {0} in Raw Materials supplied").format(supplied_item.rm_item_code))
+
 		else:
 			for item in self.get("items"):
 				if item.bom:
diff --git a/erpnext/stock/doctype/bin/bin.py b/erpnext/stock/doctype/bin/bin.py
index b3e89dc..efda055 100644
--- a/erpnext/stock/doctype/bin/bin.py
+++ b/erpnext/stock/doctype/bin/bin.py
@@ -94,27 +94,48 @@
 			self.db_set('reserved_qty_for_production', self.reserved_qty_for_production)
 			self.db_set('projected_qty', self.projected_qty)
 
-	def update_reserved_qty_for_sub_contracting(self, po_name, transferred_qty, transaction_type):
-		#Update Reserved Quantity for Sub Contracting in Bin
-		if transaction_type == "Reserve":
-			required_qty = frappe.db.sql('''select sum(itemsup.required_qty)
-				from `tabItem` item, `tabPurchase Order` po, `tabPurchase Order Item Supplied` itemsup
-				where
-					item.name = itemsup.rm_item_code
-					and po.name = %s
-					and itemsup.rm_item_code = %s
-					and itemsup.parent = po.name
-					and po.docstatus = 1
-					and po.is_subcontracted = 'Yes'
-					and item.default_warehouse = %s''', (po_name, self.item_code, self.warehouse))[0][0]
-		elif transaction_type == "Transfer":
-			required_qty = 0
-
-		reserved_qty_bin = self.reserved_qty_for_sub_contract
-		reserved_qty_for_sub_contract = reserved_qty_bin + required_qty - transferred_qty
+	def update_reserved_qty_for_sub_contracting(self):
+		#reserved qty
+		reserved_qty_for_sub_contract = frappe.db.sql('''select ifnull(sum(itemsup.required_qty),0)
+			from `tabPurchase Order` po, `tabPurchase Order Item Supplied` itemsup
+			where
+				itemsup.rm_item_code = %s
+				and itemsup.parent = po.name
+				and po.docstatus = 1
+				and po.is_subcontracted = 'Yes'
+				and itemsup.reserve_warehouse = %s''', (self.item_code, self.warehouse))[0][0]
+		#cancelled qty
+		reserved_qty_cancelled = frappe.db.sql('''select ifnull(sum(itemsup.required_qty),0)
+			from `tabPurchase Order` po, `tabPurchase Order Item Supplied` itemsup
+			where
+				itemsup.rm_item_code = %s
+				and itemsup.parent = po.name
+				and po.docstatus = 2
+				and po.is_subcontracted = 'Yes'
+				and itemsup.reserve_warehouse = %s''', (self.item_code, self.warehouse))[0][0]
+		#Get Transferred Entries
+		materials_transferred = frappe.db.sql("""
+			select
+				ifnull(sum(qty),0)
+			from
+				`tabStock Entry` se, `tabStock Entry Detail` sed
+			where
+				sed.item_code = %s and sed.s_warehouse = %s
+				and se.name = sed.parent and se.docstatus=1 and se.purpose='Subcontract'
+				and ifnull(se.purchase_order, '') !=''""", (self.item_code, self.warehouse))[0][0]
+		#Material Transfer Cancelled
+		materials_transfer_cancelled = frappe.db.sql("""
+			select
+				ifnull(sum(qty),0)
+			from
+				`tabStock Entry` se, `tabStock Entry Detail` sed
+			where
+				sed.item_code = %s and sed.s_warehouse = %s
+				and se.name = sed.parent and se.docstatus=2 and se.purpose='Subcontract'
+				and ifnull(se.purchase_order, '') !=''""", (self.item_code, self.warehouse))[0][0]
 
 		self.set_projected_qty()
-		self.db_set('reserved_qty_for_sub_contract', reserved_qty_for_sub_contract)
+		self.db_set('reserved_qty_for_sub_contract', (reserved_qty_for_sub_contract - reserved_qty_cancelled - materials_transferred + materials_transfer_cancelled))
 		self.db_set('projected_qty', self.projected_qty)
 
 def update_item_projected_qty(item_code):
diff --git a/erpnext/stock/doctype/stock_entry/stock_entry.py b/erpnext/stock/doctype/stock_entry/stock_entry.py
index 40e386e..e05ccc9 100644
--- a/erpnext/stock/doctype/stock_entry/stock_entry.py
+++ b/erpnext/stock/doctype/stock_entry/stock_entry.py
@@ -72,6 +72,8 @@
 	def on_cancel(self):
 		self.update_stock_ledger()
 		self.update_production_order()
+		if self.purchase_order and self.purpose == "Subcontract":
+			self.update_purchase_order_supplied_items()
 		self.make_gl_entries_on_cancel()
 
 	def validate_purpose(self):
@@ -807,28 +809,13 @@
 							frappe.throw(_("Batch {0} of Item {1} has expired.").format(item.batch_no, item.item_code))
 
 	def update_purchase_order_supplied_items(self):
-		materials_transferred = frappe._dict(frappe.db.sql("""
-			select
-				concat(item_code, sed.s_warehouse), sum(qty)
-			from
-				`tabStock Entry` se, `tabStock Entry Detail` sed
-			where
-				se.name = sed.parent and se.docstatus=1 and se.purpose='Subcontract'
-				and se.purchase_order= %s and ifnull(sed.s_warehouse, '') != ''
-			group by sed.item_code, sed.s_warehouse
-		""", self.purchase_order))
 		#Get PO Supplied Items Details
 		po_doc =  frappe.get_doc("Purchase Order",self.purchase_order)
 		po_supplied_items = po_doc.get("supplied_items")
-		items = list(set([d.rm_item_code for d in po_supplied_items]))
-		item_wh = frappe._dict(frappe.db.sql("""select item_code as "item_code", default_warehouse as "warehouse"
-			from tabItem where name in ({0})""".format(", ".join(["%s"] * len(items))), items))
 		#Update reserved sub contracted quantity in bin based on Supplied Item Details
 		for d in po_supplied_items:
-			warehouse = item_wh.get(d.rm_item_code)
-			transferred_qty = materials_transferred.get(d.rm_item_code + warehouse)
-			stock_bin = get_bin(d.rm_item_code, warehouse)
-			stock_bin.update_reserved_qty_for_sub_contracting(self.purchase_order, transferred_qty, transaction_type = "Transfer")
+			stock_bin = get_bin(d.rm_item_code, d.reserve_warehouse)
+			stock_bin.update_reserved_qty_for_sub_contracting()
 
 @frappe.whitelist()
 def get_production_order_details(production_order):