Fit Highlight Warranty For Free

There are two types of warranties: express and implied. 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.

Written Warranty Requirements Be written in non-legalese plain language in a single, clear, and easily readable and available document. Include the name and address of the seller. Delineate the product or parts covered by the warranty. Specify as to whether the warranty provides for a refund, replacement, or repair.

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.

How Does a Warranty Work? A warranty is a guarantee issued by a seller to a buyer that a product will meet certain specifications. If the product does not meet those specifications, the buyer can ask the manufacturer or seller to correct the problem. Certain exceptions apply, and not every defect is covered.

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.

To estimate the warranty expense for a company, we need to know three main things: Number of units sold during a particular accounting period. Percentage of the sold products that will probably need a repair or a replacement based on previous experiences. Average cost of repairing or replacing products under warranty.

The following are some tips and guidelines for composing your product warranties. Follow the rules expressed in the Magnuson-Moss Act.Clarify what the warranty does and does not cover.State the length of time that the product is covered.Give customers the option to extend.