Answer / suresh

Internal sales order is used to transfer materials from one
inventory org to another inventory org within same or
different OUs. Requisition and PO is created which triggers
internal sales order.

Intercompany sales order is a drop ship order where order is
created in one OU and fulfilled from inventory of another
OU. 3 invoices are created for intercompany sales order, 1
AR invoice from Selling OU to customer, 1 intercompany AP
invoice from selling org, 1 intercompnay AR invoice from
shipping OU.

Hope this clarifies

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