A Purchase Order (PO) is a formal document issued by the buyer to the supplier requesting the supply of goods or services. It contains details such as products, quantity, price, delivery date and payment terms.
Lesson Objective
Learn how to create, manage and track Purchase Orders in Tally Prime and understand their role in inventory and purchasing management.
1. What is a Purchase Order?
A Purchase Order is an official request sent to a supplier before purchasing goods.
Contains
Example
Supplier Name
ABC Traders
Products
Laptops, Keyboards
Quantity
10 Units
Rate
₹45,000 per Laptop
Delivery Date
25 July 2026
Payment Terms
30 Days Credit
2. Why is a Purchase Order Important?
Provides written confirmation to the supplier.
Reduces purchasing mistakes.
Helps track pending orders.
Improves inventory planning.
Avoids price disputes.
Provides proof during audits.
Supports approval workflows.
Improves supplier communication.
A Purchase Order is created before the Purchase Voucher. It is an order, not an accounting entry.
3. Features of Purchase Order
Feature
Benefit
Supplier-wise Orders
Easy order management
Order Tracking
Monitor pending supplies
Partial Receipt Support
Receive goods in multiple deliveries
Automatic Voucher Conversion
Convert PO into Purchase Voucher
Inventory Planning
Avoid stock shortages
4. Example of a Purchase Order
Soopro Computer Institute orders 20 Computers from XYZ Computers.
Item
Quantity
Rate
Total
Desktop Computer
20
₹30,000
₹6,00,000
The supplier receives the Purchase Order and supplies the goods on the agreed delivery date.
5. Purchase Order Workflow
Identify the requirement.
Select the supplier.
Create Purchase Order.
Supplier confirms the order.
Goods are delivered.
Goods Receipt is verified.
Purchase Voucher is created.
Payment is made to the supplier.
A Purchase Order itself does not affect Accounts or Inventory. The accounting impact begins when the Purchase Voucher is recorded.
6. How to Enable Purchase Order in Tally Prime
Purchase Order is an optional feature in Tally Prime. Before creating Purchase Orders, you need to enable Order Processing.
Steps
Open Tally Prime.
Press F11 (Features).
Select Inventory Features.
Enable Use Purchase Orders.
Press Ctrl + A to Save.
After enabling this option, the Purchase Order voucher becomes available in Voucher Entry.
7. Steps to Create a Purchase Order
Open Voucher Entry.
Select Purchase Order.
Choose the Supplier Ledger.
Enter the Purchase Order Number.
Select the Stock Item.
Enter Quantity.
Enter Purchase Rate.
Specify Delivery Date.
Add Terms & Conditions if required.
Press Ctrl + A to Save.
The supplier receives the Purchase Order and starts processing your request.
8. Purchase Order Status
Every Purchase Order passes through different stages until it is completed.
Status
Meaning
Open
Order created but no goods received.
Partially Completed
Only some items have been received.
Completed
All ordered goods have been received.
Cancelled
Purchase Order cancelled before supply.
Tally Prime allows you to monitor pending Purchase Orders through inventory reports.
9. Important Fields in Purchase Order
Field
Description
Order Date
Date on which Purchase Order is created.
Order Number
Unique Purchase Order reference.
Supplier Ledger
Name of the Supplier.
Stock Item
Product to be purchased.
Quantity
Required quantity.
Rate
Expected purchase price.
Delivery Date
Expected delivery schedule.
Godown
Warehouse where goods will be received.
Narration
Additional remarks.
Entering complete Purchase Order details improves supplier coordination and inventory planning.
10. Common Mistakes While Creating Purchase Orders
Common Mistake
Correct Practice
Selecting the wrong supplier.
Verify the Supplier Ledger before saving.
Incorrect item quantity.
Confirm the requirement with the purchase department.
Wrong purchase rate.
Compare with the supplier quotation.
Incorrect delivery date.
Enter the agreed delivery schedule.
Missing Purchase Order Number.
Maintain a proper PO numbering system.
Not mentioning terms & conditions.
Include payment and delivery terms whenever applicable.
Saving without verification.
Review all item details before pressing Ctrl + A.
Ignoring pending Purchase Orders.
Regularly monitor open Purchase Orders.
An incorrect Purchase Order may result in wrong deliveries, delayed supplies, excess inventory or payment disputes.
11. Real Business Case Studies
Let's understand how Purchase Orders are used in real businesses.
Business
Purchase Requirement
Action
Retail Shop
Ordered 500 Grocery Products
Created Purchase Order
Medical Store
Ordered Medicines from Distributor
Created Purchase Order
Computer Institute
Ordered 30 Desktop Computers
Created Purchase Order
Manufacturing Company
Ordered Raw Materials
Created Purchase Order
Furniture Showroom
Ordered Office Chairs
Created Purchase Order
School
Ordered Books and Stationery
Created Purchase Order
Purchase Orders help businesses plan purchases, control inventory and maintain proper supplier communication.
12. Purchase Order vs Purchase Voucher vs Sales Order
Purchase Order
Purchase Voucher
Sales Order
Request to Purchase Goods
Records Purchased Goods
Order Received from Customer
No Accounting Entry
Accounting Entry
No Accounting Entry
Before Purchase
After Goods are Received
Before Sales Invoice
Inventory Planning
Inventory Updated
Sales Planning
Supplier Document
Purchase Accounting
Customer Document
Easy Trick
📋 Purchase Order → Order Goods
📦 Purchase Voucher → Receive & Record Goods
📝 Sales Order → Customer Places Order
13. Professional Tips & Supplier Management
Always obtain quotations before creating a Purchase Order.
Select reliable suppliers.
Verify prices before approval.
Clearly mention delivery dates.
Include payment terms in the Purchase Order.
Track pending Purchase Orders regularly.
Update Purchase Orders after receiving goods.
Cancel unused Purchase Orders to avoid confusion.
Keep Purchase Orders properly filed for audits.
Review supplier performance periodically.
Professional companies usually follow an approval process before sending a Purchase Order to the supplier.
14. Practical Exercise & Interview Questions
Practical Exercise
Create a Purchase Order for Computers.
Create a Purchase Order for Medicines.
Create a Purchase Order with multiple stock items.
Create a Purchase Order with different delivery dates.
Modify an existing Purchase Order.
Cancel an unused Purchase Order.
Convert a Purchase Order into a Purchase Voucher.
Check the Pending Purchase Order Report.
Interview Questions
What is a Purchase Order?
Why is a Purchase Order created?
Does a Purchase Order affect accounts?
Does a Purchase Order affect inventory?
When should a Purchase Voucher be created?
Difference between Purchase Order and Purchase Voucher?
Difference between Purchase Order and Sales Order?
Can a Purchase Order be modified?
Can a Purchase Order be cancelled?
What is a Pending Purchase Order?
Can one Purchase Order have multiple items?
Why is supplier selection important?
What details should a Purchase Order contain?
What is an approval workflow?
How are Purchase Orders tracked?
Can Purchase Orders be partially received?
What happens after goods are received?
Why should Purchase Orders be numbered?
How do Purchase Orders help inventory planning?
Why are Purchase Orders important for audits?
15. Lesson Summary
Learned the purpose of Purchase Orders.
Created supplier purchase requests.
Understood Purchase Order workflow.
Tracked pending and completed orders.
Learned supplier management.
Converted Purchase Orders into Purchase Vouchers.
Compared Purchase Order, Purchase Voucher and Sales Order.
Learned professional purchasing practices.
Completed practical exercises.
Prepared for accounting interviews.
Congratulations!
You can now confidently create and manage Purchase Orders in Tally Prime, improving purchasing control, inventory planning and supplier management.
🧠 Quick Quiz
Which statement is correct about a Purchase Order?