What Does Requisition Mean in Accounting?

A requisition is a formal internal request within an organization for goods or services. It acts as a structured way to document a need and initiate the process of fulfilling that need. Businesses use requisitions to maintain organized records and manage internal demand. This internal document is a preliminary step in the procurement cycle, ensuring requests are properly vetted before any external financial commitments are made.

Understanding Requisition in Accounting

Within an accounting framework, a requisition serves as a foundational internal document that signals a need for resources. It is typically generated by a department or employee who identifies a requirement for specific goods or services. The primary purpose of a requisition from an accounting perspective is to initiate the purchasing process and provide visibility into anticipated expenditures. A requisition is not a purchase order; rather, it is an internal request that precedes the creation of an external commitment.

Requisitions are significant for financial control, budgeting, and expense tracking. They help prevent unauthorized spending by requiring internal approvals before any financial outlay occurs. By documenting what is needed, by whom, and for what purpose, requisitions provide an audit trail that supports financial transparency and accountability. This process enables businesses to monitor spending, ensure alignment with budget allocations, and make informed purchasing decisions.

Key Components of a Requisition

A requisition form or digital entry contains specific details essential for accurate accounting and effective financial oversight. It includes information about the requesting employee or department and the date of the request. The form also specifies a clear description of the goods or services needed, including quantities and any relevant specifications.

Further details often include the estimated cost or unit price of the items, a justification for the purchase, and the required delivery date. Many requisitions also incorporate a budget code or account number, which is crucial for proper cost allocation and tracking against departmental budgets.

The Requisition Process Flow

The requisition process typically begins when an employee or department identifies a need for goods or services. A formal requisition is then created, either on paper or through a digital system, detailing the request. Once submitted, the requisition enters an internal approval workflow, often routed to the requesting employee’s direct manager or department head.

This approval chain ensures that the request aligns with departmental needs and available budget. Depending on the value or nature of the purchase, additional approvals may be required from budget managers, the finance department, or even higher management. This multi-level approval system serves as an internal control, verifying that the expenditure is justified and within financial policies before it progresses to external procurement.

Requisition vs. Purchase Order

A common point of distinction in procurement is the difference between a requisition and a purchase order (PO). A requisition is an internal document used to obtain approval for a proposed expenditure.

In contrast, a purchase order is an external, legally binding document issued by the buyer to a supplier. It formalizes the agreement to buy specific goods or services, detailing terms such as quantity, price, and delivery. While a requisition is an internal “ask for permission,” a purchase order is the official “order to buy” sent to a vendor, making it a critical step in the procure-to-pay cycle.