Classify Spreadsheet Warranty For Free

There are two types of warranty; express warranties and implied warranties, including merchantable warranties and warranties of fitness. The seller clearly states express warranties and covers goods advertised to meet consumers' expectations. They can be written or spoken warranties.

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.

There are many types of implied warranties including an implied warranty of merchantability, an implied warranty of fitness, an implied warranty of habitability (for a lease), and an implied warranty of marketability (for the sale of real property, also known as a marketable title).

Use the following steps as a guide to account for warranty expenses: Find the total number of products sold.Determine the percentage of defective products.Calculate the number of products needing replacement.Evaluate the cost of product replacement.Estimate the total warranty expense.

Warranty Expense Recognition While recording the event in the financial statements, the company will debit (charge) the warranty expense account and credit (accrue) a liability account when the product is sold to a client.

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.

Definition of Product Warranty Liability Therefore, a company must record in the period of the sale the estimated cost of repairing or replacing the product during the warranty period. That expected cost is recorded as a liability on its balance sheet and as an expense on its income statement.