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Purchase Requisition: Definition & Process

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  • 0:00 What Is a Purchase…
  • 0:45 Process for a Purchase…
  • 1:09 Example
  • 2:32 Lesson Summary
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Lesson Transcript
Instructor: Tara Schofield
This lesson explains what a purchase requisition is, how it is used to have purchases approved, and the role it plays in accounting controls. The process of using a purchase requisition is explained, and a quiz follows.

What Is a Purchase Requisition?

A purchase requisition is a document used as part of the accounting process to initiate a merchandise or supply purchase. By processing a purchase requisition, appropriate controls can monitor the legitimacy of a purchase, as well as identify the business need for the products.

In the normal course of business, many supplies or pieces of equipment are needed. The purchases may be for products needed for business operations, such as office supplies, manufacturing, or printing needs. Purchase requisitions can also be used for inventory purchases or manufacturing supplies to create products for re-sale. Purchase requisitions are very common within government agencies as they will issue a requisition to authorize purchases and expenditures.

Process for a Purchase Requisition

While every company has their own processes that are unique to their own operation, there are basic processes that are relevant to purchase requisitions.

Here are the four key steps:

  1. A need is identified
  2. The necessary information is collected
  3. A decision on the purchase is made
  4. The purchase requisition is compared to the invoice and issued

Let's see how these steps work in a typical company.

Example

Each department within the company will have specific needs that apply to their business. For instance, the sales department may need additional brochures or sales fliers to help promote their products. In this company, any purchase over $250 requires a purchase requisition. After getting bids for their sales ads, they find their brochures will cost $550. So, this amount will require a purchase requisition. In order to make their sales, the need for sales tools is identified.

When filling out the form, the sales manager will supply the needed information, such as what the order is for, what department the cost is charged to, the specific accounting codes that apply to the sales department, the amount of the order, who the vendor is, and the terms of the purchase.

Next, the accounting department will review the purchase requisition to ensure all needed information is provided, match the purchase to the budget to make sure there is money allocated to the purchase, and verify the business need.

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