diff --git a/erpnext/stock/report/negative_batch_report/test_negative_batch_report.py b/erpnext/stock/report/negative_batch_report/test_negative_batch_report.py
index 16d50fa27c3..e0b0385f710 100644
--- a/erpnext/stock/report/negative_batch_report/test_negative_batch_report.py
+++ b/erpnext/stock/report/negative_batch_report/test_negative_batch_report.py
@@ -3,28 +3,22 @@
 
 import frappe
 
+from erpnext.stock.doctype.item.test_item import make_item
+from erpnext.stock.doctype.stock_entry.stock_entry_utils import make_stock_entry
+from erpnext.stock.report.negative_batch_report.negative_batch_report import execute
 from erpnext.tests.utils import ERPNextTestSuite
 
+WAREHOUSE = "Stores - _TC"
+COMPANY = "_Test Company"
+
 
 class TestNegativeBatchReport(ERPNextTestSuite):
 	def run_report(self, item_code):
-		from erpnext.stock.report.negative_batch_report.negative_batch_report import execute
+		filters = frappe._dict({"company": COMPANY, "warehouse": WAREHOUSE, "item_code": item_code})
+		return execute(filters)[1]
 
-		return execute(
-			frappe._dict(
-				{
-					"company": "_Test Company",
-					"warehouse": "Stores - _TC",
-					"item_code": item_code,
-				}
-			)
-		)[1]
-
-	def test_healthy_batch_not_negative(self):
-		from erpnext.stock.doctype.item.test_item import make_item
-		from erpnext.stock.doctype.stock_entry.stock_entry_utils import make_stock_entry
-
-		item = make_item(
+	def make_batch_item(self):
+		return make_item(
 			properties={
 				"is_stock_item": 1,
 				"has_batch_no": 1,
@@ -33,22 +27,38 @@ class TestNegativeBatchReport(ERPNextTestSuite):
 			}
 		).name
 
+	def receive_batch(self, item, qty, posting_date):
+		"""Receive `qty` of `item`, creating its batch, and return the batch no."""
+		make_stock_entry(item_code=item, to_warehouse=WAREHOUSE, qty=qty, rate=100, posting_date=posting_date)
+		return frappe.get_all("Batch", filters={"item": item}, pluck="name")[0]
+
+	def test_healthy_batch_not_negative(self):
+		item = self.make_batch_item()
+		batch = self.receive_batch(item, 10, "2026-06-01")
+		# issue from the same batch, staying within its balance
 		make_stock_entry(
-			item_code=item,
-			to_warehouse="Stores - _TC",
-			qty=10,
-			rate=100,
-			posting_date="2026-06-01",
-		)
-		make_stock_entry(
-			item_code=item,
-			from_warehouse="Stores - _TC",
-			qty=4,
-			posting_date="2026-06-02",
+			item_code=item, from_warehouse=WAREHOUSE, qty=4, batch_no=batch, posting_date="2026-06-02"
 		)
 
+		# received 10 then issued 4 -> running batch balance never goes negative
+		data = self.run_report(item)
+		self.assertFalse([row for row in data if row.get("batch_no") == batch])
+
+	def test_negative_batch_is_flagged(self):
+		# ERPNext blocks a negative batch balance at submission time (across several
+		# layers), so a genuinely negative batch only exists as corrupt historical
+		# data -- which is exactly what this report is meant to surface. Reproduce
+		# that state directly by forcing the batch's ledger quantity below zero.
+		item = self.make_batch_item()
+		batch = self.receive_batch(item, 10, "2026-06-10")
+
+		sle = frappe.get_all("Stock Ledger Entry", filters={"item_code": item}, pluck="name")[0]
+		entry = frappe.get_all("Serial and Batch Entry", filters={"batch_no": batch}, pluck="name")[0]
+		frappe.db.set_value("Serial and Batch Entry", entry, "qty", -3)
+		frappe.db.set_value("Stock Ledger Entry", sle, {"actual_qty": -3, "qty_after_transaction": -3})
+
 		data = self.run_report(item)
-
-		# The batch was only received (10) before being issued (4), so its running
-		# balance never goes negative; the report must not list this item's batch.
-		self.assertFalse([row for row in data if row.get("item_code") == item])
+		flagged = [row for row in data if row.get("batch_no") == batch]
+		self.assertEqual(len(flagged), 1, "A batch with a negative running balance must be flagged")
+		self.assertEqual(flagged[0]["qty_after_transaction"], -3)
+		self.assertEqual(flagged[0]["warehouse"], WAREHOUSE)