Differences between Purchase Order and Invoice.

Summary

This video tutorial explains the key differences between a purchase order (PO) and an invoice. A purchase order is a formal document created by the buyer to order goods from the seller, and once accepted, it becomes a legally binding contract. In contrast, an invoice is a document issued by the seller to notify the buyer of payment due after goods are delivered. The main differences lie in their purpose, the party responsible for creating them, and their role in the transaction—POs define the terms of purchase, while invoices confirm the sale and authorize payment.

Takeaways

• 😀 A Purchase Order (PO) is the first formal offer created by the buyer to request goods from the seller.
• 😀 Once a Purchase Order is accepted by the seller, it becomes a legally binding contract.
• 😀 A Purchase Order outlines the type, quality, quantity, and rate of the desired goods.
• 😀 An Invoice is a commercial document created by the seller to notify the buyer that payment is due for the goods sold.
• 😀 The main difference between a Purchase Order and an Invoice is their purpose: PO is for ordering, while Invoice is for payment.
• 😀 A Purchase Order is used to define the selling terms, whereas an Invoice confirms the sale and authorizes payment.
• 😀 A Purchase Order is created by the buyer, while the seller creates the Invoice.
• 😀 The recipient of a Purchase Order is the seller, whereas the recipient of an Invoice is the buyer.
• 😀 Acceptance of a Purchase Order leads to a contract of sale between the buyer and the seller.
• 😀 Acceptance of an Invoice results in a confirmation of sale, not a contract.
• 😀 A Purchase Order sets the stage for the transaction, while the Invoice confirms it has been completed and requires payment.

Q & A

What is a Purchase Order (PO)?

A Purchase Order (PO) is the first formal offer document created by the buyer and sent to the seller to initiate a purchase. It includes details about the goods to be purchased, such as type, quality, quantity, and rate.

How does a Purchase Order become legally binding?

A Purchase Order becomes legally binding once it is accepted by the seller. At that point, it forms a contract between the buyer and the seller.

What is the purpose of an Invoice?

An Invoice is a commercial document used by the seller to notify the buyer that payment is due for goods sold. It serves as a request for payment.

What is the main difference between a Purchase Order and an Invoice?

The main difference is that a Purchase Order is used to order goods from the seller, defining the selling terms, while an Invoice is used to authorize the sale and confirm the sale transaction.

Who creates a Purchase Order and who creates an Invoice?

A Purchase Order is created by the buyer, whereas an Invoice is created by the seller.

To whom are Purchase Orders and Invoices issued?

A Purchase Order is issued to the seller, whereas an Invoice is issued to the buyer.

What is the legal effect of an accepted Purchase Order?

When a Purchase Order is accepted, it results in the creation of a legally binding contract of sale between the buyer and seller.

What does the acceptance of an Invoice confirm?

The acceptance of an Invoice confirms the sale, but it does not establish a contract. It merely indicates that the payment is due.

What kind of document is a Purchase Order considered to be?

A Purchase Order is considered a commercial document used for ordering goods from the supplier.

What kind of document is an Invoice considered to be?

An Invoice is a commercial document that indicates the payment due for goods sold and serves as a confirmation of the sale.