Purchase and Sales Orders
Managing the Order → Delivery → Invoice flow in Tally — purchase orders to suppliers, sales orders from customers, and tracking pending orders
Prerequisites: Module 18 — Interest Calculation
Learning Objectives
By the end of this module, you will be able to:
- Explain the order processing flow for purchases and sales
- Record a Purchase Order (PO) in Tally
- Record a Sales Order (SO) in Tally
- View pending purchase orders and sales order fulfilment reports
What Are Orders in Accounting?
A Purchase Order (PO) is a document sent by a buyer to a supplier before the goods arrive. It commits the buyer to purchasing specific goods at specific prices. No accounting entry is made yet — the PO is just a commitment.
A Sales Order (SO) is a document received from a customer confirming their intent to buy specific goods. Again, no accounting entry yet — it's a commitment from the customer.
Key principle: Orders are NOT financial transactions. They don't affect accounts, balance sheet, or P&L. They are pre-transaction commitments that help in planning and inventory management.
The Order Processing Flow
Purchase Flow
Sales Flow
Why Orders in Tally?
Even though orders have no accounting impact, Tally tracks them because:
- Pending PO report — What is still expected from suppliers?
- Order vs delivery — Was everything in the PO received?
- Pending SO report — What has been promised to customers but not yet delivered?
- Reservation — Tally can "reserve" stock for pending sales orders
- Planning — Prevent double-ordering or missing orders
Activating Order Vouchers in Tally Prime
Order Processing vouchers — Purchase Order, Sales Order, Receipt Note, Delivery Note, Rejection In, Rejection Out — are inactive by default in a fresh Tally Prime install. Before any F11 toggle takes effect, these voucher types must first be activated through the F10 menu.
Why Inactive by Default
Tally Prime ships with only the essential voucher types active (F4 Contra, F5 Payment, F6 Receipt, F7 Journal, F8 Sales, F9 Purchase). Order/delivery vouchers are kept inactive because most small businesses don't need them — adding clutter to the F10 menu for everyone else. You activate only the ones you need.
Activation Sequence
What to Activate for Order Processing
For Sunrise Retail's order processing workflow, activate these six:
| Voucher | Shortcut (after activation) | Use Case |
|---|---|---|
| Purchase Order | F10 → Purchase Order (or Alt+F4 in some builds) | Send a PO to a supplier before goods arrive |
| Sales Order | F10 → Sales Order (or Alt+F5) | Record a customer's order before delivery |
| Receipt Note | F10 → Receipt Note | Record goods received from supplier before the invoice arrives (GRN) |
| Delivery Note | F10 → Delivery Note | Record goods dispatched to customer before raising the invoice |
| Rejection In | F10 → Rejection In | Customer-returned goods awaiting credit note |
| Rejection Out | F10 → Rejection Out | Goods returned to supplier awaiting debit note |
After activation, these voucher types appear in the F10 menu and can be opened directly.
The Full PO → Receipt Note → Purchase Invoice Flow
With all three active, the supplier-side flow becomes:
The same pattern mirrors on the customer side: Sales Order → Delivery Note → Sales Invoice. Each step has its own document trail, which auditors love.
Enabling Orders in Tally
F11 vs F10 — both are needed. F11 enables the feature; F10 → Show Inactive activates the individual voucher type. If F11 says "Allow Purchase Orders: Yes" but you skipped the F10 activation, the Purchase Order voucher still won't open. Do both — F10 activation first, F11 features second.
Sunrise Retail — Case Study Application
Purchase Order 1: Galaxy Electronics (Apr 28)
Sunrise Retail anticipates strong demand for laptops in May (HITEC City IT corridor). Kiran Sharma approves a purchase order to Galaxy Electronics:
- 50 Dell Laptops @ ₹35,000 each
- Expected delivery: May 10, 2025
- Credit terms: 30 days from delivery
Recording in Tally:
| Field | Value |
|---|---|
| Order No. | SR-PO-2025-001 |
| Party | Galaxy Electronics |
| Delivery Date | 10-May-2025 |
| Item | Qty | Rate | Amount |
|---|---|---|---|
| Dell Laptops | 50 Nos | ₹35,000 | ₹17,50,000 |
IGST @ 18% (estimated, for planning): ₹3,15,000
Estimated PO Value: ₹20,65,000 (informational only — no accounting entry)
Reports available immediately:
Shows: SR-PO-2025-001 | Galaxy | 50 Dell Laptops | Due: May 10 | ₹20,65,000
When Goods Arrive (May 10)
On May 10, Galaxy Electronics delivers 50 laptops with invoice. Now we raise a Purchase Voucher (F9) referencing the PO:
Tally auto-fills the item details from the PO. You just verify and confirm. After saving:
- The Purchase Order status changes to "Fulfilled"
- The Purchase Order disappears from the Pending PO report
- A regular purchase accounting entry is created
Sales Order 1: CloudStore's Standing Order (Apr 29)
CloudStore Online Pvt Ltd sends a standing order for 30 Samsung phones for May delivery. They want guaranteed stock allocation.
Recording in Tally:
| Field | Value |
|---|---|
| Order No. | SR-SO-2025-007 |
| Customer | CloudStore Online Pvt Ltd |
| Delivery Date | 15-May-2025 |
| Item | Qty | Rate | Amount |
|---|---|---|---|
| Samsung Mobile Phones | 30 Nos | ₹16,500 | ₹4,95,000 |
IGST @ 18% (estimated): ₹89,100
Estimated SO Value: ₹5,84,100 (no accounting entry yet)
Stock reservation: If "Reserve Stock for Sales Orders" is enabled in F11, Tally will show the 30 phones as "committed" — preventing them from being sold to another customer.
Pending SO report:
Shows: SR-SO-2025-007 | CloudStore | 30 Samsung Phones | Due: May 15 | ₹5,84,100
Partial Fulfilment
What if Galaxy delivers only 35 laptops on May 10 (instead of 50)?
When recording the purchase invoice for 35 laptops:
- Tally marks 35 as received against SR-PO-2025-001
- The remaining 15 laptops remain in Pending PO report
- The PO is "partially fulfilled"
Pending PO report now shows:
| PO | Ordered | Received | Balance | Status |
|---|---|---|---|---|
| SR-PO-2025-001 | 50 Dell Laptops | 35 | 15 | Partially Fulfilled |
Order Numbers and Tracking
Good practice for order management:
PO numbering: SR-PO-YYYY-NNN (e.g., SR-PO-2025-001) SO numbering: SR-SO-YYYY-NNN (e.g., SR-SO-2025-007)
Benefits of proper numbering:
- Reference in delivery notes and invoices
- Quick lookup during disputes ("your PO number was 001")
- Audit trail from order to payment
- Matches supplier's sales order number
Practice Exercise
Exercise 1: On May 15, Tech Park Retail Store places a Sales Order with Sunrise Retail:
- 20 Samsung phones @ ₹16,000 each (intrastate)
- 10 Dell laptops @ ₹42,000 each (intrastate)
- Requested delivery: May 25, 2025
- Order No: SR-SO-2025-012
List all fields you would fill in Tally's Sales Order voucher and calculate the estimated order value.
Show answer
Sales Order fields:
| Field | Value |
|---|---|
| Date | 15-May-2025 |
| Order No. | SR-SO-2025-012 |
| Party A/c Name | Tech Park Retail Store |
| Delivery Date | 25-May-2025 |
| Place of Supply | Telangana (intrastate) |
| Item | Qty | Rate | Amount |
|---|---|---|---|
| Samsung Mobile Phones | 20 Nos | ₹16,000 | ₹3,20,000 |
| Dell Laptops | 10 Nos | ₹42,000 | ₹4,20,000 |
| Sub-total | ₹7,40,000 | ||
| CGST @ 9% | ₹66,600 | ||
| SGST @ 9% | ₹66,600 | ||
| Estimated Order Value | ₹8,73,200 |
Remember: No accounting entry for the Sales Order. The P&L and Balance Sheet are unaffected until delivery and invoice.
Exercise 2: Sunrise Retail issued PO SR-PO-2025-002 to Sparsh Tech Solutions for 30 phones @ ₹11,500. Sparsh delivers only 20 phones and sends an invoice for 20.
What does the Pending PO report show after recording the partial purchase invoice? What should Sunrise Retail do about the remaining 10 phones?
Show answer
Pending PO report after partial receipt:
| PO No. | Supplier | Item | Ordered | Received | Balance | Status |
|---|---|---|---|---|---|---|
| SR-PO-2025-002 | Sparsh Tech | Phones | 30 Nos | 20 Nos | 10 Nos | Partially Fulfilled |
What Sunrise Retail should do:
Option 1: Wait for balance delivery. The PO remains open. When Sparsh delivers the remaining 10, Sunrise Retail records a second Purchase Invoice referencing SR-PO-2025-002. The PO closes.
Option 2: Cancel the balance. If Sparsh cannot supply the remaining 10 (out of stock, discontinued model), Sunrise Retail can close the PO in Tally:
Or place a new PO with a different supplier.
Option 3: Raise a Debit Note for shortage (covered in Module 14). If the invoice was raised for 30 but only 20 delivered, Sunrise Retail issues a Debit Note for the 10 units difference.
Pending POs should be reviewed weekly — an old PO left open clutters reports and may represent either a tracking failure or a supply commitment not followed up.
Key Terms
| Term | Meaning |
|---|---|
| Purchase Order (PO) | Formal document from buyer to supplier committing to buy specified goods |
| Sales Order (SO) | Document confirming customer's intent to buy — commits Sunrise Retail to supply |
| Pending PO | Purchase order where delivery has not yet been fully received |
| Order Fulfilment | Completion of an order — when all items are delivered/received |
| Partial Fulfilment | Part of the ordered quantity has been received/delivered |
| Stock Reservation | Setting aside stock for a pending sales order — prevents sale to others |
| GRN | Goods Receipt Note — document confirming physical receipt of goods |
Module Summary
- Purchase Orders and Sales Orders are pre-transaction commitments — no accounting entry is created
- They appear only in Inventory reports (Pending PO, Pending SO) — not in financial reports
- When goods arrive (purchase) or are dispatched (sales), the actual accounting vouchers are raised
- Tally auto-fills item details from a PO/SO into the purchase/sales voucher — saves time and reduces errors
- Partial fulfilment keeps the remaining quantity in the pending report for follow-up
- Good practice: systematic order numbering (SR-PO-YYYY-NNN) for traceability
Quick Quiz
- A Purchase Order in Tally:
- a) Creates a debit to Purchases account immediately
- b) Creates no accounting entry — only an inventory commitment
- c) Increases the supplier's outstanding balance
- d) Generates a GST liability
Show answer
Answer: b — A Purchase Order is a pre-transaction commitment with no accounting entry. No debit to Purchases, no GST liability, no change to the supplier's balance until an invoice is raised.
- After raising Sales Order SR-SO-2025-007 (30 phones for CloudStore), the Balance Sheet will show:
- a) CloudStore as a debtor for ₹5,84,100
- b) No change — orders have no balance sheet impact
- c) Inventory reduced by 30 phones
- d) Advance income of ₹5,84,100
Show answer
Answer: b — Sales Orders have no accounting impact. CloudStore does not become a debtor until a Sales Invoice is raised. Inventory only reduces when a Delivery Note or Sales Invoice is recorded.
- When Galaxy delivers 35 out of 50 ordered laptops, the Pending PO report shows:
- a) PO fully closed — all 50 received
- b) PO with 15 laptops still pending — partially fulfilled
- c) PO cancelled — partial delivery not accepted
- d) Two separate POs for 35 and 15
Show answer
Answer: b — Tally tracks partial fulfilment. The PO remains open with the 15-unit balance shown as pending until fully received or manually closed.
- Stock reservation for a Sales Order means:
- a) The stock is sold and removed from inventory
- b) The stock is committed to that customer and shows as reserved
- c) The stock value is reduced by the SO amount
- d) Tally auto-generates the sales invoice
Show answer
Answer: b — Stock reservation marks the quantity as committed to a specific Sales Order. It cannot be sold to another customer until the SO is fulfilled or cancelled. The stock remains in inventory — it is not removed until delivery.
Next up: Module 20 — Multiple Price Levels — Configuring different selling prices for retail vs wholesale vs distributor customers, and how Tally auto-populates the right price for each customer.