Q:Is it possible to create invoices for Internal Sales Order?
ISO invoice is not a sale to the customer hence autoinvoice process is not applicable to the ISO invoice. Autoinvoice program is only meant for AR transaction related to Sales Order of customers. ISO invoice is meant for organizational stock transfer and the accounting effect takes place automatically after the receipt of material by the destination organization and it can be seen thru' Receipt(Localized) window. Since ISO invoice is not a sales business function, Inter-unit receivable and Inter-unit payable accounts gets accounted by the system as defined in the shipping network setup and autoinvoice process is not applicable to this process.
For that You need enabled intercompany transactions in SOB