diff --git a/erpnext/stock/doctype/serial_no/serial_no.py b/erpnext/stock/doctype/serial_no/serial_no.py
index 80c93ef434..7194ec1c70 100644
--- a/erpnext/stock/doctype/serial_no/serial_no.py
+++ b/erpnext/stock/doctype/serial_no/serial_no.py
@@ -187,7 +187,7 @@ def process_serial_no(sle):
 	update_serial_nos(sle, item_det)
 
 def validate_serial_no(sle, item_det):
-	if item_det.has_serial_no==0:
+	if item_det.has_serial_no==0 and sle.is_cancelled == "No":
 		if sle.serial_no:
 			frappe.throw(_("Item {0} is not setup for Serial Nos. Column must be blank").format(sle.item_code),
 				SerialNoNotRequiredError)