What is a purchase order?

A purchase order is a formal agreement to purchase goods or services. It is a document that a buyer issues to a seller, indicating the types, quantities, and agreed prices for products or services. By creating a purchase order, the buyer establishes a legal obligation for both parties, outlining the details of the transaction and serving as a reference for future communication. This document helps to organize and confirm an order, and it can serve as a basis for invoicing and payment processes.

In contrast, a transaction report typically summarizes the outcomes of various transactions but does not serve as a commitment to purchase. A payment receipt confirms that a payment has been made but does not detail any purchasing agreement. A shipping label is a label affixed to a package to indicate the destination and is related to the logistics of delivery rather than the purchasing process itself.