diff --git a/erpnext/stock/doctype/item/test_item.py b/erpnext/stock/doctype/item/test_item.py
index 29d6bf2df8b..179f7237f96 100644
--- a/erpnext/stock/doctype/item/test_item.py
+++ b/erpnext/stock/doctype/item/test_item.py
@@ -712,6 +712,7 @@ def create_item(
 	item_code,
 	is_stock_item=1,
 	valuation_rate=0,
+	stock_uom="Nos",
 	warehouse="_Test Warehouse - _TC",
 	is_customer_provided_item=None,
 	customer=None,
@@ -727,6 +728,7 @@ def create_item(
 		item.item_name = item_code
 		item.description = item_code
 		item.item_group = "All Item Groups"
+		item.stock_uom = stock_uom
 		item.is_stock_item = is_stock_item
 		item.is_fixed_asset = is_fixed_asset
 		item.asset_category = asset_category
diff --git a/erpnext/stock/doctype/stock_entry/stock_entry.py b/erpnext/stock/doctype/stock_entry/stock_entry.py
index 92f90a1c7d6..e0bdc9229f5 100644
--- a/erpnext/stock/doctype/stock_entry/stock_entry.py
+++ b/erpnext/stock/doctype/stock_entry/stock_entry.py
@@ -590,7 +590,7 @@ class StockEntry(StockController):
 					)
 					+ "<br><br>"
 					+ _("Available quantity is {0}, you need {1}").format(
-						frappe.bold(d.actual_qty), frappe.bold(d.transfer_qty)
+						frappe.bold(flt(d.actual_qty, d.precision("actual_qty"))), frappe.bold(d.transfer_qty)
 					),
 					NegativeStockError,
 					title=_("Insufficient Stock"),
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 9fa61098a0b..e810c7933cc 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
@@ -7,7 +7,7 @@ import frappe
 from frappe.core.page.permission_manager.permission_manager import reset
 from frappe.custom.doctype.property_setter.property_setter import make_property_setter
 from frappe.tests.utils import FrappeTestCase, change_settings
-from frappe.utils import add_days, add_to_date, today
+from frappe.utils import add_days, add_to_date, flt, today
 
 from erpnext.accounts.doctype.gl_entry.gl_entry import rename_gle_sle_docs
 from erpnext.stock.doctype.delivery_note.test_delivery_note import create_delivery_note
@@ -40,6 +40,9 @@ class TestStockLedgerEntry(FrappeTestCase, StockTestMixin):
 			"delete from `tabBin` where item_code in (%s)" % (", ".join(["%s"] * len(items))), items
 		)
 
+	def tearDown(self):
+		frappe.db.rollback()
+
 	def assertSLEs(self, doc, expected_sles, sle_filters=None):
 		"""Compare sorted SLEs, useful for vouchers that create multiple SLEs for same line"""
 
@@ -754,6 +757,93 @@ class TestStockLedgerEntry(FrappeTestCase, StockTestMixin):
 		)
 		self.assertEqual(abs(sles[0].stock_value_difference), sles[1].stock_value_difference)
 
+	@change_settings("System Settings", {"float_precision": 4})
+	def test_negative_qty_with_precision(self):
+		"Test if system precision is respected while validating negative qty."
+		from erpnext.stock.doctype.item.test_item import create_item
+		from erpnext.stock.utils import get_stock_balance
+
+		item_code = "ItemPrecisionTest"
+		warehouse = "_Test Warehouse - _TC"
+		create_item(item_code, is_stock_item=1, stock_uom="Kg")
+
+		create_stock_reconciliation(item_code=item_code, warehouse=warehouse, qty=559.8327, rate=100)
+
+		make_stock_entry(item_code=item_code, source=warehouse, qty=470.84, rate=100)
+		self.assertEqual(get_stock_balance(item_code, warehouse), 88.9927)
+
+		settings = frappe.get_doc("System Settings")
+		settings.float_precision = 3
+		settings.save()
+
+		# To deliver 100 qty we fall short of 11.0073 qty (11.007 with precision 3)
+		# Stock up with 11.007 (balance in db becomes 99.9997, on UI it will show as 100)
+		make_stock_entry(item_code=item_code, target=warehouse, qty=11.007, rate=100)
+		self.assertEqual(get_stock_balance(item_code, warehouse), 99.9997)
+
+		# See if delivery note goes through
+		# Negative qty error should not be raised as 99.9997 is 100 with precision 3 (system precision)
+		dn = create_delivery_note(
+			item_code=item_code,
+			qty=100,
+			rate=150,
+			warehouse=warehouse,
+			company="_Test Company",
+			expense_account="Cost of Goods Sold - _TC",
+			cost_center="Main - _TC",
+			do_not_submit=True,
+		)
+		dn.submit()
+
+		self.assertEqual(flt(get_stock_balance(item_code, warehouse), 3), 0.000)
+
+	@change_settings("System Settings", {"float_precision": 4})
+	def test_future_negative_qty_with_precision(self):
+		"""
+		Ledger:
+		| Voucher | Qty		| Balance
+		-------------------
+		| Reco	  | 559.8327| 559.8327
+		| SE	  | -470.84	| [Backdated] (new bal: 88.9927)
+		| SE	  | 11.007	| 570.8397 (new bal: 99.9997)
+		| DN	  | -100	| 470.8397 (new bal: -0.0003)
+
+		Check if future negative qty is asserted as per precision 3.
+		-0.0003 should be considered as 0.000
+		"""
+		from erpnext.stock.doctype.item.test_item import create_item
+
+		item_code = "ItemPrecisionTest"
+		warehouse = "_Test Warehouse - _TC"
+		create_item(item_code, is_stock_item=1, stock_uom="Kg")
+
+		create_stock_reconciliation(
+			item_code=item_code,
+			warehouse=warehouse,
+			qty=559.8327,
+			rate=100,
+			posting_date=add_days(today(), -2),
+		)
+		make_stock_entry(item_code=item_code, target=warehouse, qty=11.007, rate=100)
+		create_delivery_note(
+			item_code=item_code,
+			qty=100,
+			rate=150,
+			warehouse=warehouse,
+			company="_Test Company",
+			expense_account="Cost of Goods Sold - _TC",
+			cost_center="Main - _TC",
+		)
+
+		settings = frappe.get_doc("System Settings")
+		settings.float_precision = 3
+		settings.save()
+
+		# Make backdated SE and make sure SE goes through as per precision (no negative qty error)
+		make_stock_entry(
+			item_code=item_code, source=warehouse, qty=470.84, rate=100, posting_date=add_days(today(), -1)
+		)
+
 
 def create_repack_entry(**args):
 	args = frappe._dict(args)
diff --git a/erpnext/stock/stock_ledger.py b/erpnext/stock/stock_ledger.py
index 7bdf2078c4a..da57ba054dc 100644
--- a/erpnext/stock/stock_ledger.py
+++ b/erpnext/stock/stock_ledger.py
@@ -1,4 +1,4 @@
-# Copyright (c) 2015, Frappe Technologies Pvt. Ltd. and Contributors
+# Copyright (c) 2022, Frappe Technologies Pvt. Ltd. and Contributors
 # License: GNU General Public License v3. See license.txt
 
 import copy
@@ -360,7 +360,7 @@ class update_entries_after(object):
 			self.args["name"] = self.args.sle_id
 
 		self.company = frappe.get_cached_value("Warehouse", self.args.warehouse, "company")
-		self.get_precision()
+		self.set_precision()
 		self.valuation_method = get_valuation_method(self.item_code)
 
 		self.new_items_found = False
@@ -371,10 +371,10 @@ class update_entries_after(object):
 		self.initialize_previous_data(self.args)
 		self.build()
 
-	def get_precision(self):
-		company_base_currency = frappe.get_cached_value("Company", self.company, "default_currency")
-		self.precision = get_field_precision(
-			frappe.get_meta("Stock Ledger Entry").get_field("stock_value"), currency=company_base_currency
+	def set_precision(self):
+		self.flt_precision = cint(frappe.db.get_default("float_precision")) or 2
+		self.currency_precision = get_field_precision(
+			frappe.get_meta("Stock Ledger Entry").get_field("stock_value")
 		)
 
 	def initialize_previous_data(self, args):
@@ -571,7 +571,7 @@ class update_entries_after(object):
 					)
 
 		# rounding as per precision
-		self.wh_data.stock_value = flt(self.wh_data.stock_value, self.precision)
+		self.wh_data.stock_value = flt(self.wh_data.stock_value, self.currency_precision)
 		if not self.wh_data.qty_after_transaction:
 			self.wh_data.stock_value = 0.0
 		stock_value_difference = self.wh_data.stock_value - self.wh_data.prev_stock_value
@@ -595,6 +595,7 @@ class update_entries_after(object):
 		will not consider cancelled entries
 		"""
 		diff = self.wh_data.qty_after_transaction + flt(sle.actual_qty)
+		diff = flt(diff, self.flt_precision)  # respect system precision
 
 		if diff < 0 and abs(diff) > 0.0001:
 			# negative stock!
@@ -1347,7 +1348,8 @@ def validate_negative_qty_in_future_sle(args, allow_negative_stock=False):
 		return
 
 	neg_sle = get_future_sle_with_negative_qty(args)
-	if neg_sle:
+
+	if is_negative_with_precision(neg_sle):
 		message = _(
 			"{0} units of {1} needed in {2} on {3} {4} for {5} to complete this transaction."
 		).format(
@@ -1365,7 +1367,7 @@ def validate_negative_qty_in_future_sle(args, allow_negative_stock=False):
 		return
 
 	neg_batch_sle = get_future_sle_with_negative_batch_qty(args)
-	if neg_batch_sle:
+	if is_negative_with_precision(neg_batch_sle, is_batch=True):
 		message = _(
 			"{0} units of {1} needed in {2} on {3} {4} for {5} to complete this transaction."
 		).format(
@@ -1379,6 +1381,22 @@ def validate_negative_qty_in_future_sle(args, allow_negative_stock=False):
 		frappe.throw(message, NegativeStockError, title=_("Insufficient Stock for Batch"))
 
 
+def is_negative_with_precision(neg_sle, is_batch=False):
+	"""
+	Returns whether system precision rounded qty is insufficient.
+	E.g: -0.0003 in precision 3 (0.000) is sufficient for the user.
+	"""
+
+	if not neg_sle:
+		return False
+
+	field = "cumulative_total" if is_batch else "qty_after_transaction"
+	precision = cint(frappe.db.get_default("float_precision")) or 2
+	qty_deficit = flt(neg_sle[0][field], precision)
+
+	return qty_deficit < 0 and abs(qty_deficit) > 0.0001
+
+
 def get_future_sle_with_negative_qty(args):
 	return frappe.db.sql(
 		"""