diff --git a/erpnext/stock/doctype/item/test_item.py b/erpnext/stock/doctype/item/test_item.py
index d57308b..669cabc 100644
--- a/erpnext/stock/doctype/item/test_item.py
+++ b/erpnext/stock/doctype/item/test_item.py
@@ -30,7 +30,10 @@
 test_ignore = ["BOM"]
 test_dependencies = ["Warehouse", "Item Group", "Item Tax Template", "Brand", "Item Attribute"]
 
-def make_item(item_code, properties=None):
+def make_item(item_code=None, properties=None):
+	if not item_code:
+		item_code = frappe.generate_hash(length=16)
+
 	if frappe.db.exists("Item", item_code):
 		return frappe.get_doc("Item", item_code)
 
diff --git a/erpnext/stock/doctype/stock_ledger_entry/test_stock_ledger_entry.py b/erpnext/stock/doctype/stock_ledger_entry/test_stock_ledger_entry.py
index 684a8d4..6a2e7fb 100644
--- a/erpnext/stock/doctype/stock_ledger_entry/test_stock_ledger_entry.py
+++ b/erpnext/stock/doctype/stock_ledger_entry/test_stock_ledger_entry.py
@@ -739,6 +739,30 @@
 			{"incoming_rate": sum(rates) * 10}
 		], sle_filters={"item_code": packed.name})
 
+	def test_negative_fifo_valuation(self):
+		"""
+		When stock goes negative discard FIFO queue.
+		Only pervailing valuation rate should be used for making transactions in such cases.
+		"""
+		item = make_item(properties={"allow_negative_stock": 1}).name
+		warehouse = "_Test Warehouse - _TC"
+
+		receipt = make_stock_entry(item_code=item, target=warehouse, qty=10, rate=10)
+		consume1 = make_stock_entry(item_code=item, source=warehouse, qty=15)
+
+		self.assertSLEs(consume1, [
+			{"stock_value": -5 * 10, "stock_queue": [[-5, 10]]}
+		])
+
+		consume2 = make_stock_entry(item_code=item, source=warehouse, qty=5)
+		self.assertSLEs(consume2, [
+			{"stock_value": -10 * 10, "stock_queue": [[-10, 10]]}
+		])
+
+		receipt2 = make_stock_entry(item_code=item, target=warehouse, qty=15, rate=15)
+		self.assertSLEs(receipt2, [
+			{"stock_queue": [[5, 15]], "stock_value_difference": 175}
+		])
 
 def create_repack_entry(**args):
 	args = frappe._dict(args)