What is the GL Impact of Both Item Receipt and Mark Shipped on a Drop-Ship PO?

When a drop-ship purchase order line is processed, the general ledger impact on vendor bills varies depending on the fulfillment method used.

Standard GL Impact (Mark Shipped Only)

When a drop-ship purchase order line is fulfilled solely by marking it as shipped (via the 'Mark Shipped' button on the purchase order or the 'Mark Shipped' link from the Receive Orders page), and a vendor bill is subsequently created, the bill's general ledger impact typically includes:

• Debit: Cost of Goods Sold account
• Credit: Accounts Payable account

GL Impact with Both Item Receipt and Mark Shipped

NetSuite allows both an Item Receipt and a Mark Shipped fulfillment to be recorded for the same drop-ship purchase order line. However, this dual processing alters the general ledger impact on subsequent vendor bills.

Consider the following sequence:

1. A drop-ship purchase order is partially received using the 'Receive' link from the Receive Orders page, and a vendor bill is created for the received quantities.

2. Subsequently, the same drop-ship purchase order is partially marked as shipped, and a second vendor bill is created for these marked shipped quantities.

   In this scenario, the second vendor bill's general ledger impact will differ:

   • Debit: Inventory Received Not Billed account
   • Credit: Accounts Payable account

   This occurs instead of impacting the Cost of Goods Sold account. Furthermore, if a fulfillment is performed on the related Sales Order for this drop-ship line, the general ledger impact of the Sales Order fulfillment will be blank.

   System Preference: 'Allow Both Mark Shipped Fulfillments and Receipts on a Drop Shipment Line'

   NetSuite includes a preference located at Setup->Accounting->Preferences titled "Allow Both Mark Shipped Fulfillments and Receipts on a Drop Shipment Line". This preference can be set to "Do not Allow".

   This preference is generally intended to:

   • Help prevent the creation of a receipt against a drop-ship purchase order line that already has a mark shipped fulfillment line.
   • Help prevent the entry of a fulfillment against an order line that already has an item receipt with inventory and accounting impact.

   However, when this preference is set to "Do not Allow" and an Item Receipt is first recorded, followed by a Mark Shipped action for the same drop-ship purchase order line from the Receive Orders page, a message may appear. If acknowledged, NetSuite *may* still allow the Item Shipment to be saved, even with the preference configured to "Do not Allow".

   Additionally, while some documentation may suggest that the 'Mark Shipped' button becomes unavailable after an order is received as the first step, observations indicate that the 'Mark Shipped' button *may* still appear and be clickable, leading to the New Item Shipment page.