Report Required Field Warranty For Free

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.

The Income Tax Department contends that the Company makes a provision for warranty based on the past practice and experience and it is only a contingent liability, the contingency being that the product sold by the company undergoes repairs during warranty period.

Answer and Explanation: Explanation: Warranty expense should be recorded in the period that the product is sold. Under the matching principle, a warranty is an expense that is associated with the sale of an item covered by the warranty.

To record the liability, the company would debit warranty expense and credit accrued warranty, which is a liability on the balance sheet. The purpose of this is to record the cost of the warranty in the same period that the revenue is recognized.

Download Sample Warranty Policy Template What does this Warranty Policy cover? What will you do to correct problems? How long does the coverage last? What does this Warranty Policy not cover? What do customers need to do to get repairs/service under the warranty? Applicable state laws.

Ask the company to repair or replace the defective or broken product that should be enclosed with the letter you sent. Clarify to the company when the product was replaced and clarify what your warranty states. Enclose a sales receipt and a copy of the warranty in case there are any doubts or questions.

Costs of warranty include the cost of labor and materials to repair a product during the warranty period. The main term of the warranty period is one year.