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Purchase Order

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Definition:

A purchase order is a document sent to a supplier or vendor, authorizing shipment of a product to the customer at a specified price and terms. The creation of a purchase order creates a legally binding contract which cannot be changed without the consent of both parties.

A customer may sometimes create an open or standing purchase order which allows the customer to order quantities of the product(s) from the vendor over a period of time (usually a year) at the specified price. Open POs are often used for services which occur over a period of time.

The typical sections of a purchase order are:

  • Date
  • The purchase order number
  • Names and addresses of both the customer and the supplier/vendor.
  • Description of the items being ordered, the cost for each, and the total amount.
The PO number is an important reference for both the customer and the supplier.

Also Known As: Purchase Requisition
Examples:
CarteBlanche Company issued a purchase order for catalogs from Regis Printing, locking in the agreed-upon price for the catalogs. CarteBlanche Company had a standing PO with Regis Printing for catalogs, ordering off the PO number as needed.
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