Purchase cycle: from purchase order to payment
2 min read
Updated 03 Oct 2026
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AI summary
The steps from requisition to payment, the three-way match, and how purchase returns are handled in accounts and GST.
8 sections
Key facts
- A controlled purchase cycle stops paying for goods you never received, duplicate bills and wrong GST.
- The core check is the three-way match: the purchase order (what you ordered), the goods receipt note (what arrived) and the supplier's invoice (what you are billed) must agree on item, quantity and rate.
- Claim ITC only when you have the tax invoice, the goods or services are received, and the invoice shows in your GSTR-2B.
Steps in the cycle
| Step | Document | Who |
|---|---|---|
| 1. Need raised | Purchase requisition | User department |
| 2. Quotes compared | Comparison sheet | Purchase team |
| 3. Order placed | Purchase order (PO) | Purchase team, approved by manager |
| 4. Goods received | Goods receipt note (GRN) with quantity and condition | Stores |
| 5. Bill received | Supplier's tax invoice | Accounts |
| 6. Three-way match | PO vs GRN vs invoice | Accounts |
| 7. Bill booked | Purchase voucher | Accounts |
| 8. Payment | Payment voucher, after TDS if any | Accounts, approved |
Purchase returns
- If goods are returned, the supplier should issue a credit note (preferred under GST), or you issue a debit note to the supplier for your records.
- The supplier's GST credit note reduces your ITC. Reverse the ITC in the month the credit note appears in your GSTR-2B.
| Event | Entry |
|---|---|
| Purchase | Purchases A/c Dr, Input CGST/SGST or IGST Dr, To Supplier A/c |
| Return | Supplier A/c Dr, To Purchase Returns A/c, To Input CGST/SGST or IGST |
Common questions
Can I book a purchase before the goods arrive?
Book the liability when the goods are received or the service is done. If the invoice arrives before the goods, hold it until the GRN is made. At year end, record goods received but not billed as a provision.
What if the invoice rate is higher than the PO?
Do not book it at the higher rate without approval. Ask the supplier for a corrected invoice or a credit note for the difference.
Do I need e-way bill details on a purchase?
The supplier or transporter generates the e-way bill for consignments above ₹50,000. Keep its number with the GRN; it helps prove the goods were actually received.
Sources
Law as of October 2026. Verify against the latest notifications before relying on it for filings.
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