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What are the Steps Involved in Purchase of Material?

What are the Steps Involved in Purchase of Material?

Course: B.Com

1 Answer

The Main Steps Involved in Purchase of Material are:

  • Purchase Requisition.
  • Selecting the Supplier.
  • Purchase Order.
  • Receiving and Inspection of Materials.
  • Checking and Passing of Bills for Payment.

Purchase Requisition:

Purchase requisition is a form used as a formal request to the purchase department to order goods or services. It is used to authorize the purchasing department to make a purchase and provides a description and quantity of material required. This form is prepared by store-keeper for regular stock of materials and by department head for special materials not stocked as regular items.

Regular requisitions are made when the stock is reduced to reorder level. This requisition is then approved by an executive. Purchase requisition are made in triplicate the original copy is submitted to Purchase department, duplicate copy to store-keeper or executive and the third copy is submitted to costing department. Purchase requisition contains requisition no, date, department code number, description and quantity of material required, signature of person initiating the requisition and signature of one or more executives approving the purchase requisition.


Selecting the Supplier:

After deciding the material to be purchased, purchasing department would invite the tenders or quotations for supply of goods, on the receipt of these quotations from suppliers, a comparative statement is prepared. This statement is known as schedule of quotations. For selecting the quotation manager should not make price the only basis. He should consider the factors like quality, time of delivery, dependability of the supplier, discount, credit facility, term of payment etc.

Purchase Order:

After selecting the best quotation, purchase department makes a purchase order for supply of materials. This order is the written request to the supplier to supply materials, It serves as evidence of contract between buyer (to accept the goods) and supplier to supply goods. The purchase order should contain date, name, address of Supplier, description and specification of material, quantity ordered, time, place of delivery, terms of payment, transport charges, packing and shipping instructions, name and address of buyer and signature of purchase manager.

Big concerns make five copies of purchase order. Usually the no of depends on size of the organization. Original copy is sent to supplier, second to receiving department, third copy to department initiating the purchase requisition, fourth to accounts department and fifth is kept with purchasing department. The copy is used by purchasing department to check the progress of order and delivery.

Receiving and Inspection of Materials:

The receiving department is responsible for taking the charge of the incoming materials, checking and verifying their quantities, inspecting them as regards their quality or other technical specifications and if found acceptable, passing them on to the stores. If supply is acceptable the receiving department prepares the receiving note, five copies are made the first copy is sent to purchase department, second campy to the store, third copy to cost department, fourth to receiving department and the last by department originating the requisition.

Factories also have a separate-inspection department. Its main function is to test the material received for quality and specifications. The engineer ensures that quality is according to the purchase order after checking he submits a report.

Checking and Passing of Bills for Payment:

Invoice is the document giving the details of goods supplied and amount to be paid. It is sent by purchasing department to accounting department to check the authenticity and arithmetical accuracy. It is necessary to check the totals and extensions. After checking invoice a rubber stamp is put along with the signature of purchase manager. Invoice is then passed to accounting department for payment.

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April 6, 2019