## Material Issue Procedure

### Authorization Principle

No material may be issued without a properly authorized requisition. The foreman of the department typically holds issue authority. Materials are issued on a FIFO basis to prevent deterioration of older stock.

### Key Documents

#### 1. Material Requisition Note (MRN)

Acts as a voucher authorizing issue for factory/department use.
Storekeeper verifies: (a) authorized signature, (b) quantity matches Bill of Materials.
One copy retained by stores for record.

#### 2. Material Transfer Note

Used when surplus materials from one job are transferred to another job (rather than returned to store).
Direct inter-job transfer should be limited to specific circumstances.
Prepared in duplicate: one for Cost Accounting (ledger entry), one for the transferring department.

#### 3. Shop Credit Note / Stores Debit Note (Return of Material)

When excess material is returned from production to stores.
Prepared by the returning department in triplicate.
Ensures the job is credited with the cost of unused materials and stock records are updated.

### Summary of Document Flow

Situation	Document	Copies
Issue to production	Material Requisition Note (MRN)	Minimum 2
Transfer between jobs	Material Transfer Note	Duplicate
Return to stores	Shop Credit Note / Stores Debit Note	Triplicate

### Monitoring Material Consumption

The storekeeper periodically analyses MRNs, return notes, and transfer notes to prepare a Material Abstract (Material Issue Analysis Sheet) — a summary document used for cost accounting and variance analysis.

Worked example

### Example 1

Document Trail for a Production Run

Department A raises an MRN for 500 kg of Steel (authorized by Foreman). Storekeeper verifies Bill of Materials specifies 500 kg and issues it.

During production, only 460 kg is used. 40 kg surplus is returned via a Shop Credit Note (triplicate: stores copy, cost accounts copy, department copy). Job cost is credited ₹40 × ₹80/kg = ₹3,200.

Separately, 20 kg of surplus Brass from Job 101 is unsuitable for return (wrong grade for stores) but can be used in Job 202. A Material Transfer Note is raised: Job 101 is credited and Job 202 is debited with the transfer cost.

### Example 2

Material Abstract Preparation

At month-end, the storekeeper compiles all MRNs:

Job A: 1,200 kg @ ₹80 = ₹96,000
Job B: 800 kg @ ₹80 = ₹64,000
Overhead maintenance: 100 kg @ ₹80 = ₹8,000

Total issues per abstract = ₹1,68,000

This abstract is sent to cost accounts to update the cost ledger.

⚠️ Common exam mistakes

Confusing Shop Credit Note (return to stores) with Material Transfer Note (transfer to another job) — returns go back to the storekeeper; transfers go to another job without passing through stores.
Forgetting that FIFO is used for physical issue sequence (to prevent deterioration), which may differ from the costing method used for pricing those issues.
Assuming verbal or informal authorizations suffice — the storekeeper must have a written, signed MRN before issuing any material.
Not distinguishing between a return to vendor (defective/rejected materials) and a return to stores (excess usable materials) — the accounting treatment differs.

Reference:

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Material Issue Procedure (MRN, Transfer Note, Return Note)

Worked example

⚠️ Common exam mistakes