All business enterprises keep a proper record of economic transactions right from its inception with issuing purchase order till final settlement of the transaction; each step is recorded systematically. People are often very confused regarding purchase order and invoice. Now, in this article the complete meaning and difference are discussed with the help of a comparison chart, so have a look.
Content: Purchase Order Vs Invoice
|Basis for Comparison||Purchase Order||Invoice|
|Meaning||Purchase Order is a commercial instrument used for ordering goods from the supplier.||An Invoice is a commercial instrument indicating the payment 'due' against goods sold.|
|Effect of Acceptance||Contract of Sale||Confirmation of Sale|
Definition of Purchase Order
A document used by the buyer to order required goods from the supplier is known as a purchase order. The order comprises of the list of products or services along with its agreed price the seller would offer. If accepted, it becomes a binding contract between both the parties. The purchase order is produced by the buyer and issued to the supplier for acceptance. A copy of purchase order is sent to the account payable department so that it can be matched with the invoice in the future.
It carries following details:
- Date of issue
- Purchase Order Number
- Details of Goods
- Name and Address of Buyer
- Name and Address of Seller
- Terms and Conditions
- Signature of Issuing Authority
Definition of Invoice
When the goods have been delivered to the buyer, the seller issues a document to the buyer, to request for payment of the goods delivered. This document is known as the invoice. It is the indicator of indebtedness of the purchaser to the seller, i.e. goods of some value have been delivered to the buyer on which payment is still due. It creates a debtor-creditor relationship between buyer and seller.
Types of Invoice are pro forma invoice, commercial invoice, tax invoice, customs invoice, etc. It carries following details:
- Date of Issue
- Invoice number
- Purchase Order number
- Quantity of goods sold
- Agreed Prices
- Discount (if any)
- Taxes (if any)
- Total Amount Due
- Name and Address of the buyer
- Name and Address of the seller
- Signature of the seller or his authorised agent
Key Differences Between Purchase Order and Invoice
- Purchase Order is created by the buyer while the seller creates an invoice.
- Purchase Order is issued to the seller whereas Invoice is issued to the buyer.
- The Purchase Order contains only purchase order number while invoice includes both purchase order number and invoice number.
- Legal Commercial Document
- Purchase Order Number
- Details of buyer and seller
Purchase Order is a kind of proposal to the seller made by the purchaser for entering into a contract for sale. Issuing the purchase order is the beginning of the contract which completes on the final settlement of the transaction. When goods are sent to the buyer, the seller issues an invoice in which the details of goods delivered are specified. On the acceptance of the invoice the sale is confirmed, after that when the payment is made the deal is completed.