The Cancel Invoice Option allows you to cancel the selected invoice. This option is used when the invoice is created, but the items on the invoice will not be shipped (i.e. the order was cancelled after it was invoiced).
The Cancel Invoice option cancels or reverses the selected invoice by creating a credit memo for the items on the invoice and then applying the credit memo to the invoice.
Your ability to cancel an invoice is controlled by a system parameter F248:ARINVCAN. If this parameter is set to Y, you may cancel an invoice. If the parameter is set to N or it is blank or missing, you may not cancel an invoice in the program.
You may not cancel vendor ship invoices, or invoices which have payment or adjustment activity.
When the cancel invoice option is used,
• The selected invoice is reversed. The system automatically creates a credit memo for the invoice. The items and quantities from the invoice are returned to stock and any serialized inventory records are updated to show that they are back in stock.
• The system applies the credit memo used to reverse the shipment to the original invoice, causing both invoices to be closed.
• The original sales order used for the selected invoice is not re-opened.
The following link provides more information about the Cancel Invoice option.