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Purchasing and Procurement Function in ACCA BT

Updated 11 October 2026 · Fact-checked

The purchasing function obtains the goods and services a business needs at the right quality, quantity, price and time. The procurement cycle runs from requisition to order, receipt, invoice and payment. To answer exam questions, match each document to its stage and check controls and links to accounts payable.

Understand Purchasing and Procurement Function

Purchasing is the function that buys goods and services for the organisation. Procurement is wider. It covers identifying the need, choosing suppliers, negotiating terms, ordering, receiving, and managing the supplier relationship. In the exam, the two words are often used as if they mean the same thing, but procurement is the broader process.

The aim is to get the right goods, in the right quantity, at the right quality, at the right price, from the right supplier, at the right time. These are sometimes called the five rights. Buying the cheapest item is not always best. Poor quality or late delivery can cost more than the saving.

The procurement cycle follows a set order. A department raises a purchase requisition. Purchasing checks it is authorised and sends a purchase order to the chosen supplier. The supplier delivers the goods. The stores team checks them and records a goods received note (GRN). The supplier sends an invoice. Accounts payable matches the order, GRN and invoice. If they agree, the invoice is approved and paid.

Purchasing links closely to accounting. Accounts payable relies on purchasing documents to check that a supplier invoice is valid. Accounting records the liability, the purchase or inventory cost, and the payment. Finance also sets budgets and approval limits, and monitors spend and supplier payment terms. Good coordination helps cash flow, because paying too early wastes cash and paying too late can harm supplier relationships.

Supplier selection uses criteria such as price, quality, reliability, delivery time, payment terms, financial stability and ethical record. Many firms keep an approved supplier list and compare quotes or run tenders for large purchases.

Key formulas to remember

Procurement cycle order: Requisition → Purchase order → Goods received note → Supplier invoice → Three-way match → Payment; Learn the order. Exam questions often ask which document comes next or who raises it.
Three-way matching: Purchase order = Goods received note = Supplier invoice (quantity, price, terms); Accounts payable pays only when all three agree. Differences must be investigated first.
The five rights of purchasing: Right quality, quantity, price, time and supplier; Use these as a checklist for any question about purchasing objectives.

How to solve Purchasing and Procurement Function questions

Use this method for questions on the purchasing function, procurement documents, supplier selection or links to accounts payable.

1Read the question and decide what is tested: a document, a stage, a role, a control or supplier selection.
2Place the situation in the procurement cycle. Ask which stage has been reached.
3Identify who is involved: requesting department, purchasing, stores or goods inward, accounts payable.
4Match the document to its purpose. The requisition requests, the order commits, the GRN proves receipt, the invoice demands payment.
5For control questions, think of authorisation, segregation of duties and matching of documents.
6For supplier questions, compare the options against the stated criteria, not just price.
7Check each option against the exact wording and select the best fit.

Quickest way: Stage and document shortcut

When to use it: Use this for single-answer or multiple-response objective test questions on procurement documents and responsibilities.

Say the cycle in your head: requisition, order, GRN, invoice, match, pay.
Find the stage in the question and pick the document linked to it.
Ask who raised it: the buyer raises the order, the supplier raises the invoice, stores raise the GRN.
Remove options that break segregation of duties, such as the same person ordering, receiving and paying.
For multiple response, select exactly the number stated.

Common mistakes in Purchasing and Procurement Function

Confusing the purchase requisition with the purchase order.
Both have 'purchase' in the name and both relate to buying.
Fix: The requisition is an internal request from a department. The order is the external document sent to the supplier.
Thinking the supplier raises the goods received note.
Students link all documents with the supplier delivery.
Fix: The GRN is made by the buyer's stores or goods inward team. The supplier sends a delivery note and an invoice.
Paying an invoice because it has arrived.
The invoice looks like a demand, so it seems to be enough.
Fix: Pay only after matching the invoice to the order and the GRN.
Choosing the cheapest supplier as the best one.
Price is easy to compare and cost saving seems the goal.
Fix: Weigh quality, reliability, delivery and payment terms against the price.
Saying purchasing and accounts payable are the same function.
Both deal with suppliers.
Fix: Purchasing obtains goods and manages suppliers. Accounts payable checks invoices, records liabilities and makes payments.

Worked examples

Example 1

A company receives 500 units from a supplier. The purchase order was for 500 units at $4 each. The goods received note shows 480 units received. The supplier invoice charges for 500 units at $4. Which action should accounts payable take, and what amount is supported by the documents?

Show the solution

Compare the three documents. The order and invoice say 500 units, but the GRN says 480.
The invoice is not supported in full, because only 480 units were received.
The supported amount is 480 × $4 = $1,920.
The invoiced amount is 500 × $4 = $2,000. The difference is $80.
Accounts payable should not pay the full invoice. It should query the difference with the supplier or ask for a credit note.

Answer: Hold payment and query the difference. The documents support $1,920, not the $2,000 invoiced.

Example 2

Place these documents in the correct order in the procurement cycle: supplier invoice, purchase requisition, goods received note, purchase order. Then state who normally raises the goods received note.

Show the solution

The process begins when a department requests the goods: purchase requisition.
Purchasing then commits the company to the supplier: purchase order.
When the goods arrive, they are checked and recorded: goods received note.
The supplier then bills the company: supplier invoice.
The goods received note is raised by the company's stores or goods inward department, because it records what was actually received.

Answer: Order: purchase requisition, purchase order, goods received note, supplier invoice. The stores or goods inward department raises the GRN.

Exam tips

Learn the document order and the person who raises each one. This is the most common objective test angle.
For control questions, look for segregation of duties. Ordering, receiving and paying should be done by different people.
In number entry questions, compare quantities on the GRN with the invoice and calculate on the received quantity.
In supplier selection questions, use the criteria given in the scenario. Do not assume price is the main factor unless it says so.
Read multiple response questions carefully and select exactly the number of options requested.

Practice questions from The relationship between accounting and other business functions

Purchasing and Procurement Function: frequently asked questions

What is the difference between purchasing and procurement?

Purchasing is the act of buying goods and services. Procurement is wider and includes identifying needs, selecting suppliers, negotiating, ordering, receiving and managing suppliers. In many exam questions the terms are used loosely, so focus on what the question describes.

Which documents are used in the procurement cycle?

The main documents are the purchase requisition, purchase order, delivery note, goods received note and supplier invoice. Payment is often supported by a remittance advice. Accounts payable uses the order, GRN and invoice for matching.

How does purchasing link to the accounting department?

Purchasing provides the orders and receipt records that accounts payable uses to check invoices. Accounting then records the liability and the payment. Finance also sets budgets and approval limits for spending.

What is three-way matching?

It is a control where the purchase order, goods received note and supplier invoice are compared before payment. The quantity, price and terms should agree. It reduces the risk of paying for goods not ordered or not received.