When running PRC: Generate Draft Revenue for a single project - On the output report it displays unp

When running PRC: Generate Draft Revenue for a single project - On the output report it displays unprocessed expenditure items for an AP cancelled credit memo.

Rejection Reason= N/A

Revenue Error= No

Is this the expected behaviour? How to remove them? Or How to mark them as not billable?

I have tried making them non-billable from the (N) Expenditure >> Expenditure Inquiry >> All >> Tools >> Non-Billable

But I get the following error message: You cannot perform this action on an item which has been fully reserved