The difference between purchases and purchase orders can be understood as follow:
- Purchase Order (PO): A purchase order is a formal request sent from a buyer to a seller to buy certain products or services. It includes details such as product descriptions, quantities, prices, and agreed terms. A PO serves as a contractual agreement before the transaction takes place.
- Purchase: A purchase is the act of acquiring the goods or services that were specified in a purchase order. This action generally follows the approval and processing of the purchase order. The purchase involves confirming receipt of the goods/services and usually involves payment.
A purchase order does not immediately affect inventory until the goods are received, whereas a purchase impacts inventory records as it signifies the acquisition of goods.