Materials that are created by the production process, for sale to customers, from other materials

Basic Procurement Process

The Basic Procurement Process involves several steps that organizations follow to acquire goods or services from suppliers. The correct order of these steps is as follows:

1. Purchase Requisition: This is the initial step where a request is made within the organization to procure certain goods or services. The purchase requisition is typically created by the department or individual in need of the items.
2. Purchase Order: Once the purchase requisition is approved, a purchase order is issued to the selected vendor. The purchase order specifies the details of the requested items, such as quantity, price, delivery date, and any terms and conditions.
3. Receive Materials: Upon delivery of the goods from the vendor, the organization receives and verifies the materials against the purchase order. This step ensures that the received items match the order and are in acceptable condition.
4. Receive Invoice: The vendor sends an invoice to the organization for the delivered goods or services. The invoice includes details such as the amount owed, payment terms, and any applicable discounts or taxes.
5. Send Payment: After verifying the invoice and ensuring its accuracy, the organization proceeds to make the payment to the vendor within the specified payment terms.

Customers connect to a company's ERP system using Enterprise Resource Planning (ERP).

Financial Impact of a Purchase Order

When a company issues a Purchase Order to a Vendor, the financial impact is Debit Inventory & Credit Accounts Payable.

Financial Impact of Receiving Goods

When a company receives goods from a Purchase Order, the financial impact is Debit Inventory & Credit Accounts Payable.

The process of selling and delivering products to the organization's customers is known as Fulfillment Process.