Solution:

A drop shipment order has been entered in the Order Entry (OE) module. The order is received completely in the Purchase Order (PO) module and an invoice is created. At a later date, the Drop Ship order is returned and now reversing entries need to be made to process this return.

In this case, voiding the Accounts Receivable (AR) invoice will not correctly reverse this transaction. It will instead incorrectly bring the Drop Ship item into the DROP location. This is due to the fact that the Location field in the invoice header is defaulting to the DROP location rather than an actual receiving location.

This issue is documented under PTR 79619. A solution is provided below, f ollow the steps to reverse a fully received and invoiced drop ship order:

OE Module

Important
This process should be fully evaluated in a test company before implementing in a live system. The steps below assume that the order has been fully shipped and there are no open quantities left to be fulfilled.

1. Under the Transaction menu, point to Enter Orders and click Returns.
2. Select the customer who is returning the drop shipment from the Customer  picklist.
3. Confirm the header information and ensure that the Def Loct field is set to the correct receiving warehouse location.
4. Type the sales order number that this return applies to in the  Apply To field.
5. In the Line Item Detail tab, click Apply Line.
6. From the pick list, select the drop ship item that is being returned.
7. Type the quantity being received into inventory.
8. Verify that the Loct field is set to the same location as the Def Loct field in the header.
9. Save the line item and order.
   
   ImportantThe location entered for the line item must be the same location the item will be issued from in order to correctly change the on-hand quantity to zero.
10. Under the Transaction menu, click Enter Shipments. This will add the item to the default receiving warehouse.
11. When prompted to edit the cost, click No.
12. Type the correct return sales order number in the shipment screen.
13. Click Ship.
14. Confirm the shipment date and choose to ship the order complete.
15. Click Save to process the shipment.
16. When prompted for the destination of the shipment log, click None.
17. Exit the shipment screen.
18. Click Batch, Individual or Cancel when prompted to print the credit memo.

The return sales order now has a credit memo for this vendor.

PO Module

1. Under the Transaction menu, point to Enter Orders and click Returns.
2. Select the vendor that originally supplied this drop ship item.
3. Verify that the Receiving Loct field is the same as the return sales order.
4. Click the Line Item Detail tab.
5. Click Proceed when prompted that no apply to purchase order number was entered.
6. Select the correct drop ship item from the Item picklist.
7. Type the quantity of items being returned into the Order Qty field.
8. Save the line and order.
9. Receive the purchase order completely.

AR Module

1. Under the Transaction menu, click Apply Credits/Deposits.
2. Select the customer that returned the order.
3. Type all appropriate information and save.
4. Select the credit memo created for this drop ship return from the Credit Details picklist.
5. Click Apply.
6. Click Automatic. This will apply the Credit Memo to the original invoice that was created for the drop ship sales order.

This process has now returned the drop ship order completely and reversed any effect on General Ledger.

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