Warranty Provision From A Sales Contract
Description
How to fill out Provision In Warranty Excluding Warranty Coverage For Defects Caused By Improper Packing, Unauthorized Service Or Repair?
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FAQ
Accrue the warranty expense with a debit to the warranty expense account and a credit to the warranty liability account. As actual warranty claims are received, debit the warranty liability account and credit the inventory account for the cost of the replacement parts and products sent to customers.
Must work as that type of product is regularly used, even if the customer ordered it to work differently. Must be consistent with quality and quantity. Must be labeled and packaged as stated in the sales contract. Must follow the specifications stated on the label of the package.
A warranty clause is a provision in a contract that generally provides a promise specifying that something is true or will happen.
The costs associated with a manufacturer's product warranty are part of its selling expenses and therefore part of its SG&A expenses. If the future costs of the warranty coverage are probable and can be estimated, they are recorded at the time of the sale.
For example, when you buy a new car from a car dealer, the warranty states that the car works. If the car doesn't work, the warranty gives the owner the right to have the dealer fix the car under certain conditions (length of time, cause of damage, etc.). These conditions are typically spelled out in the warranty.
