Sales orders and purchase orders are important terms in business and accounting. Both of these documents track purchases and sales for a company. If a buyer wants to buy goods or services, they send out a purchase order to the seller. A sales order is a document that a seller sends to a buyer to confirm that the goods will be sold. Both documents are applied significantly in business transactions. Students have to learn the difference between sales order and purchase order clearly. These pieces of paper manage orders, inventory, and accounts. Its use in popular software such as purchase and sales order in tally, purchase and sales order processing in tally erp 9, purchase order and sales order between sap are very common.
What is Sales Order?
The document created by the seller is known as a sales order. It indicates the provision of goods to the buyer. Once a seller receives a purchase order, they create the sales order. It details what the seller will provide, for what cost and by when. It is used to verify the details of the sale. This is the buyer’s name and address as well as details of the product and its total value. Sales order is also a legal document. This will assist the seller in keeping track of what has been sold and what still needs to be shipped.
A sales order must be entered in the system for record-keeping in systems like Tally, SAP. It makes tracking orders simple and seamless.
A sales order contains:
- Sales order number
- Date of order
- Name of buyer
- Details of products
- Quantity and rate
- Total price
- Delivery schedule
For instance, in Tally, students learn how to create a sales order in sales and purchase order options. This is a tally training that very helpful for future job as part of purchase and sales order.
Sales orders aid in providing timely delivery and accurate billing. They also provide both parties with clarity on the details involved in the sale.
Purpose of Sales Order
Sales order serves to give control to seller over sales. It gives the buyer what they pay for. It also assists in monitoring and administering deliveries and payments. Let’s explore the primary functions of a sales order:
Confirm Buyer’s Request
The sales order informs the buyer that his request has been accepted. It also indicates the seller’s dedication to supplying the goods.
Plan Inventory and Delivery
The sales order is used by the seller to determine how much stock they require. This allows them to improve their stock management and not end up with delays.
Support Accounting Entries
Sales orders will help to generate the sales invoices. Sales Orders: In Tally, users can create sales orders and link them to invoices. It reduces errors.
Legal Evidence of Sale
In case there is any legal problem, the sales order can show what was agreed. It protects the seller.
Easier Auditing
During audits, sales orders assist in monitoring the sales of the company. Auditors can pose them with invoices and payments.
Hence this document is very helpful for software’s like Tally ERP 9. In order to find out the specifications of the particulars that students learn, many are up to purchase and sales orders processing in tally erp 9 so students can learn how to manage business using the software.
Hence, every bubble in business has a sales order prominent in the background.
What is a Purchase Order?
A purchase order is a written document that is sent by the buyer to the seller. It indicates the kind of products, quantity, and price at which the buyer wants. When a company requires materials such as raw materials or products, they send this order form to the supplier.
Contrarily, the purpose of a purchase order is to establish mutual consent between the buyer and the seller before any goods are delivered. It avoids confusion later. A contract is created when the seller accepts the purchase order. It establishes the buyer’s desire to purchase.
There are many reasons why businesses use purchase orders. They assist with inventory management, budget control, and future planning. In case of any issue, such as delay in delivery or incorrect items, this document aids to rectify it quickly.
You can easily record and track purchase orders in Tally and SAP. Many of the students learn purchase order and sales order in tally pdf and they used it for learning. Using such software saves a great deal of time for businesses.
A purchase order includes:
- PO number
- Date of order
- Buyer and seller names
- List of goods
- Quantity and unit price
- Delivery date and address
Regardless of the size of the business, purchase orders are utilized. You are also assisted during the audit or tax check by them. It makes the business process very smooth and transparent.
Purpose of Purchase Order
The purpose of the purchase order is to establish a clear understanding between the buyer and seller. It also offers legal coverage to the selling process and avoid the future conflict. Here’s how a purchase order support business:
Ensures Clear Communication
Purchase orders specify what the buyer desires. It contains quantity, types of goods, price, and delivery dates. This reduces confusion.
Acts as a Legal Document
A purchase order serves as evidence in case a seller fails to deliver or provides the incorrect product. It works as a legal contract.
Helps in Budget Planning
The firm already sets a budget each year. This helps keep track of what’s being spent with purchase orders. It allows the finance team to budget for future expenditures.
Tracks Order and Delivery
Companies use the PO number to track delivery and stock levels. This keeps the stock neat and organized.
Assists in accounting and auditing
It also creates a record of expenses with delivery. They are also the proof of purchase during audits.
This process is made simple by software like Tally. In Tally ERP 9, Users can also enter purchase orders and relate them to invoices during purchase and sales order processing. It also assists with tracking payments. Especially in the case of commerce exams or courses. Students had to study creating purchase orders and managing purchase orders.
Difference Between Sales Order & Purchase Order
Sales orders and purchase order assist businesses in the proper management of buying and selling. While they are similar, they are designed to perform distinct functions and are produced by different entities.
A purchase order is a document from a buyer to a seller indicating types, quantities, and agreed prices for products or services. Whereas a sales order is created by the seller after accepting a purchase order, as an acknowledgement they will fulfill the goods or services requested. Overview Introduction in Many Aspects:
Creator of the Document
- Purchase Order: An order placed by the buyer.
- Sales Order: Issued by the seller to confirm the sale.
Purpose of the Document
- Purchase Order: A purchase order is a request for goods or services provided, including a complete description of the specifics such as the quantity, type, delivery date, etc.
- Sales Order: Confirms explicitly the seller’s acceptance of the buyer’s order lined up with the initial steps in the supply process.
Role in the Business Process
- Purchase order: to start the process of buying.
- Sales Order: Initiates the selling process.
Legal Value
- Purchase Order: − Serves as a legal agreement which binds the purchaser to purchase the items as stated.
- Sales Order: By serving as a legal document, a sales order binds the seller to provide the claimed goods.
Document Flow
- Purchase Order: Hook up with sales order. The buyer sends it first.
- Sales order: Follows the purchase order which means purchase order and is released upon PO receipt
Contents of the Document
- Purchase Order
- Sales Order
- PO Number
- SO Number
- Date
- Buyer’s Details
- Item Description
- Quantity
- Price Per Item
- Delivery Address
- Payment Terms
- Tax and Shipping Info
Software Recording (Tally or SAP such as)
- In Tally, purchases orders are entered in Purchase Order Voucher and sales in Sales Order Voucher.
- To track the complete transaction in SAP, you can create a link between sales order and purchase order sap.
Control Purpose
- Purchase Order: Make it easier for buyers to manage purchases, stock, and budgets.
- Sales Order: Assists sellers with deliveries, stock management, and sales invoices.
Responsibility
- Purchase Order: It shifts the onus on the buyer to accept and pay for goods.
- Sales Order: Shifts the burden onto the seller to deliver goods accurately and timely.
Use in Accounting Software
- Both are tracked in purchase and sales order processing in tally erp 9 and you can generate invoices using them as per need.
- You can download the tutorial in tally purchase order and sales order in pdf format also for better understanding.
| Items | Purchase Order | Sales Order |
| Made by | Buyer | Seller |
| When used | At the time of ordering | After receiving PO |
| Legally binding | Buyer | Seller |
| Purpose | Request goods/services | Confirm sale |
| Controls | Purchase process | Sales process |
| System Entry | Purchase Order Voucher | Sales Order Voucher |
| Appears first | Yes | No |
Real-life Example:
- A shop needs 100 notebooks. A purchase order is sent to the supplier by the manager.
- The supplier verifies the PO and provides a sales order confirming delivery in 3 days.
- Invoice is generated and payment is received after delivery.
Relevance to ACCA Syllabus
In financial accounting, audit & assurance and management accounting sales and purchase orders are essential to understand for ACCA. It teaches students how transactions flow through an organization, how internal controls operate, and how financial records are kept.
Sales Order and Purchase Order ACCA Questions
Q1: What role does a purchase order play in accounting?
A. To monitor customer complaints
B. To order goods or services from a supplier
C. To make a payment to the vendor
D. To calculate profits
Answer: B. Request goods or services from a supplier
Q2: In an accounting system, a sales order is most commonly recorded when:
A. Goods are returned
B. The supplier requests the goods
C. Buy goods on the customer side
D. A payment is made
Answer: C A customer commits to purchasing goods
Q3: When a sales order is created, what follows?
A. Stock is auto updated
B. The seller shall pay
C. The delivery process starts
D. The purchase order got cancelled
Answer: C. The delivery process begins
Q4: Sales and purchase orders assist in ascertaining in the audit procedure:
A. Depreciation
B. Revenue and expense recognition
C. Dividend payments
D. Capital budgeting
Answer: B. Revenue and expense recognition
Q5: Which document helps to make sure that no duplicate orders are placed?
A. Ledger
B. Bank statement
C. Purchase order
D. Trial balance
Answer: C. Purchase order
Relevance to US CMA Syllabus
In CMA, sales and purchase orders are integral to cost accounting, budgeting, and internal control systems. Very much relevant for cost flow analysis, demand planning, and variance analysis.
Sales Order and Purchase Order US CMA Questions
Q1: Which document does the management accounting use for predicting future sales revenue?
A. Purchase order
B. Sales order
C. Credit note
D. Pay slip
Answer: B. Sales order
Q2: Why is a Purchase Order in Inventory Management?
A. It is useful in setting targets for employees
B. Enables cost planning and order tracking
C. It monitors activity of competitors
D. It computes bonuses for employees
Answer: B. It enables cost planning and order tracking
Q3: Which internal control objective is achieved by using sales and purchase orders?
A. Outsourcing operations
B. Timely hiring of employees
C. Authorisation and responsibility.
D. Increase dividend payout
Answer: C. Authorization and accountability
Q4: In cost allocation, sales orders are used:
A. Track overhead expenses
B. Assign costs to products sold
C. Pay salaries
D. Audit payroll
ANSWER: B. Allocate costs to products sold
Q5: Which one helps in identifying anticipated cash flows from customers?
A. Trial balance
B. Sales order
C. Bank reconciliation
D. Stock register
Ans: B. Sales order
Relevance to US CPA Syllabus
In CPA examinations such as Auditing, Financial Accounting, and BEC, knowledge of sales order and purchase order helps in topics related to internal controls, audit evidence, and transaction recording.
Sales Order and Purchase Order US CPA Questions
Q1: Under which assertion is a sales order most useful to an auditor when doing a test?
A. Valuation
B. Occurrence
C. Completeness
D. Classification
Answer: B. Occurrence
Q2: What is a proof of authority to buy document?
A. Delivery note
B. Purchase order
C. Payment voucher
D. Ledger entry
Answer: B. Purchase order
Q3: Handling Audits: Connecting Purchase Order with Sales Order in Placement
A. They are unrelated
B. Both confirm payment
C. In a business transaction, one activates another.
D. Bank records
Answer C. One effects the other in a business transaction
Q4: In tests of controls in an audit, the matching of: a purchase order to an invoice will help substantiate:
A. Classification of assets
B. Completeness of revenue
C. Accuracy of liabilities
D. Purchases must be approved properly
Answer D. Proper purchase approval
Q5: What risk can be minimized with numbered purchase orders and numbered sales orders?
A. Tax evasion
B. Errors in retained earnings
C. Duplicate transactions
D. Employee turnover
Answer: C. Duplicate Transactions
Relevance to CFA Syllabus
Introduction In CFA Level I and II, the topic is supportive of corporate finance, financial reporting, and working capital management. That knowledge is essential to analyze the cash flow, inventory cycles, and operational efficiency.
Sales Order and Purchase Order CFA Questions
Q1: Sales orders assist forecasting:
A. Long-term capital structure
B. Marketing costs
C. Future revenues and receivables
D. Shareholder equity
Answer: Future revenues and receivables
Q2: The most useful purchase order applications in analysis are:
A. Bond valuations
B. Inventory turn and cash cycle
C. Interest rate risks
D. Equity valuation
Answer: B. Inventory turnover and cash cycle
Q3: Connecting sales orders to revenue in financial modeling helps with:
A. Depreciation analysis
B. Creating profit margins
C. Projecting top-line growth
D. Restructuring liabilities
Answer: C. Forecasting top-line growth
Q4: Which of the following ratios can be supported by purchase order data?
A. Debt/Equity Ratio
B. Inventory Days Outstanding
C. Return on Assets
D. P/E Ratio
Answer: B. Inventory Days Outstanding
Q5: Which of the following is a leading indicator for a company’s operational demand?
A. Annual report
B. Purchase order
C. Income statement
D. Cash flow from financing
Answer: B. PO (Purchase Order)
