Adjust Age Warranty For Free

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If the company can reasonably estimate the amount of warranty claims likely to arise under the policy, it should accrue an expense that reflects the cost of these anticipated claims. The accrual should take place in the same reporting period in which the related product sales are recorded.

A business typically recognizes warranty expenses during the same period as its product sales, as long as the business anticipates incurring the expense and has a reasonable estimation of the expense amount. Generally, the actual warranty expense a company accrues can vary from the historical warranty percentage.