Terumos, Chapter 1, Mishnah 10. This Mishnah lays down the basic principle that we have circled several times already in this chapter: when a person has two kinds of produce before him, one that has reached the completion of its processing and one that has not, he may not separate Terumah from one for the other. The novelty of our Mishnah is that after the fact, once it has been done, the Terumah takes effect.
By Torah law, one who takes Terumah from flour for grain that has not yet been threshed or winnowed - the Terumah is valid after the fact. And likewise in the reverse case: even one who takes from grain that has not been threshed or winnowed for the flour, thereby giving the kohen the less processed and therefore less valuable product - the Terumah is valid after the fact.
A comparison to the law of oil and wine:
As we mentioned above in Chapter 1, Mishnah 4, we find a similar case with oil and wine: one who gives grapes or olives for wine and oil that are already processed and ready - his Terumah is not Terumah. There, however, the disqualification is only rabbinic, because the Sages did not want the kohen to lose out and be required to press the olives himself, which is a considerable bother. But in the Mishnah before us the basic principle is stated: initially one may not separate in either direction, and after the fact the Terumah takes effect.
The language of the Mishnah:
"Ein torimin midavar shenigmerah melachto al davar shelo nigmerah melachto" - one may not take Terumah from something whose processing has been completed, such as flour, for something whose processing has not yet been completed. For example: if one person has flour and his fellow has grain that has not been threshed, he may not separate from the flour for the unthreshed grain.
"V'lo midavar shelo nigmerah melachto al davar shenigmerah melachto" - and likewise one may not take from the unthreshed grain for the flour.
"V'lo midavar shelo nigmerah melachto al davar shelo nigmerah melachto" - if two vessels of unthreshed grain stand before him, and he has not threshed, winnowed, or piled up any of it, this is not the time for separating Terumah, and he must wait until the processing is complete.
"V'im tarmu, terumasan terumah" - if he transgressed and did one of these three things, separating from the one improperly, the Terumah takes effect, at least after the fact.
In summary: this Mishnah teaches that initially one does not separate Terumah from something whose processing has been completed for something whose processing has not been completed, nor the reverse, nor from two items whose processing has not been completed one for the other; but in all three cases, if he separated - his Terumah is Terumah. In this, our law differs from the law of the grapes and olives in Mishnah 4, where the Terumah does not take effect, because of the enactment of the Sages not to cause the kohen a loss.