Posting an anwer i got from Oracle support community just in case anyone is interested in this. Please share any other feedback if you have any.
Thank you for logging a thread with PeopleSoft GL community. According to Bug 11403957 - PSFT 1575307000-PROBLEM WITH PARTIAL POSTING OF INTERUNIT JOURNAL, it is working as designed for an interunit journal to permit partial posting.
Here is the development feedback:
"This is not a bug since it is fairly well documented. Customers have provided opinions on both sides of the coin for this and if anything, this could be an enhancement request and we would need strong business case for the requirement.
Given below is observation about the same:
Partial posting is required because each business unit maintains control over its own ledger and open period and posting. That iss why, you get more than one line in the 'Mark Journal to Post' for same journal Id i.e., for each business unit, you will get a line. Say, you have two business unit involved in interunit journal, then you will get two lines in the 'Mark Journal to Post' page for the same journal Id.
Also, when you create a InterUnit journal and edit it, it creates balancing lines. Say, you have journal with two lines involving two different business unit. When you edit such a journal, it will create two additional lines to balance the journal at business unit level. As the journal is balanced at business unit level, it will allow you to post one of the line from 'Mark Journal to Post' page.
You can follow any of the following methods to avoid partial posting of journals:
1) You can mark the journal to Post from the 'Edit Journal' page itself in which case, when you will post the journal, the journal will be completely posted.
2) You can select all the lines for the journal to post from 'Mark Journal to Post' . If you missed to mark one of the line for posting and as a result you got partial posting, you can again go back to 'Mark Journal to Post' page and mark the journal to post."
I have checked for any documented enhancement requests and I do not see any. We could add one, but there would be no guarantee that the enhancement would occur and it would not happen in 9.2 or before.
Hope this clarifies.