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Warranties Form

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Instructions and help about warranties

hi I'm Jonathan wild and we are going to cover how to account for warranties so you know when you buy something expensive like like a new car many times it comes with a warranty a warranty is a company's guarantee or promise that defective products will be repaired or replaced warranties last for a specific period of time like like 90 days or even 5 years now the accounting for a warranty from the seller's perspective can be a bit tricky this is because the seller reports the expected warranty expense in the same period the sale is reported not when a warranty claim is actually made this will all make more sense with an example so let's assume we sell a car for $40,000 on December 1st with a one-year warranty or a 12,000 mile warranty covering parts and based on analytics of the cost and likelihood of repairs we estimate warranty expense to be 3% of the car's selling price therefore in this case we take the car's selling price of $40,000

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