Classify Required Field Warranty For Free

In accounting jargon, the assurance-type warranty is an example of a contingent that is both probable and can be estimated. Therefore, a company must record in the period of the sale the estimated cost of repairing or replacing the product during the warranty period.

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.

Under the implied category are three major subtypes: the implied warranty of merchantability (only given by merchants), the implied warranty of fitness for a particular purpose, and the implied warranty of title.

(Service-Type Warranty Sold Along With the product) When the customer comes for repair or maintenance of the product, the revenue is realized, and the revenue earned is made. The revenue earned account is credited, and the liability as unearned warranty revenue is decreased, therefore, debited.

There are two general types of warranties, expressed and implied. Each category has different sub-types of warranties, with terms, conditions, and guarantees.

General Warranty Deed: the most common and most used Warranty Deed provides the buyer with the greatest protection. In this deed, the seller will warrant and defend against all claims whomsoever, which means if there are any issues with the marketability of the title, the buyer could hold the seller liable.

When accounting for warranty expense, companies estimate the amount at the time of product sales to ensure the most accurate cost projection for repairing or replacing defective items. In some cases, a warranty period can extend beyond one year, depending on the type of product.