A purchase order is a written request to a supplier for certain items at an agreed price. The request also specifies the terms of payment and delivery. The purchase order is an authorization to the supplier to deliver the items and present an invoice. When the supplier accepts the purchase order, a binding purchase contract is set up.
All items purchased by a company must be accompanied by purchase orders, which are listed serially in order to provide control over their use. An example of a purchase order can be as shown below:
Source: Hargadon, Bernard J and Múnera Cárdenas, Armando. Cost accounting. Grupo Editorial Norma, 1996, p.21
The following aspects are generally included in a purchase order:
- Printed name and address of ordering company Purchase order number Vendor name and address Date of order and required delivery date Delivery and payment terms Quantity of items ordered Catalog number Description Unit and total price Shipping, handling, insurance and related costs. Total cost of the order Authorized signature
The original is sent to the supplier and the copies usually go to the accounting department to be recorded in the account payable and another copy to the purchasing department.
In the following video you will learn how to make a purchase order with MS Excel in a simple way:
