A promise to repair, replace, refund, etc. a product during a specified period. The company making the promise has a contingent liability and a warranty expense that should be recorded at the time the product is sold.
A promise to repair, replace, refund, etc. a product during a specified period. The company making the promise has a contingent liability and a warranty expense that should be recorded at the time the product is sold.
will not be recorded and it will not have to be disclosed in the notes to the financial statements. An example is a nuisance lawsuit where there is no similar case that was ever successful. Example of Recording a...
The expense associated with a commitment to repair or replace a product for a specified period of time. The expense should be reported on the income statement at the time that the sale of the product is reported in order...
The cost of repairing or replacing previously sold products during their warranty periods.
See warranty liability.
A liability account that reports the estimated amount that a company will have to spend to repair or replace a product during its warranty period. The liability amount is recorded at the time of the sale. (It is also the...
What is boilerplate? Author: Harold Averkamp, CPA, MBA In business, boilerplate is a term to describe the standard wording that is contained in warranties and other documents. Generally, the information that is...
A potential liability dependent upon some future event occurring or not occurring. For example, a company is named as a defendant in a $1 million lawsuit. Does that mean the company automatically has a liability of $1...
, a company’s liability for warranties on its products and its allowance for uncollectible accounts receivable will need to be estimates. Providing an estimated amount is better than ignoring reality and reporting a...
When should a product warranty liability be recorded? Author: Harold Averkamp, CPA, MBA Definition of Product Warranty Liability A product warranty means the manufacturer or seller has a potential liability and expense...
of merchandise, sales of extended warranties, and repair revenues The fees earned by a law firm for legal services provided to clients The amounts earned by publishers of magazines, newspapers, and electronic...
Is a manufacturer's product warranty part of its manufacturing overhead or is it part of its SG&A expense? Author: Harold Averkamp, CPA, MBA The costs associated with a manufacturer’s product warranty are part of its...
Featured Review
"I am currently working for a Pharmacy Benefits Management company (PMB). I discovered AccountingCoach when I was in college going through the accounting program. Sometimes in school, the concepts weren't always clear to me, or I just needed a concise refresher on certain accounting topics. AccountingCoach fulfilled both of these needs for me. I became a PRO user because I found value in the additional resources I received. It really helped me to solidify my understanding of the accounting process. I like the materials on AccountingCoach because of the clarity and conciseness of the information. I find myself wanting to brush up on things from time to time, and because of the format of the AccountingCoach platform, I'm able to quickly find what I need. I have benefited from the materials both academically and professionally. In school, I did well in my courses, and I know that using AccountingCoach contributed to my success. Professionally, I have felt confident in communicating with my coworkers regarding accounting concepts, which has in turn helped me to progress in the company. Sometimes when I’m working, I reference the templates provided on AccountingCoach to guide my work. I will be using this site for years to come!" - M.G.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviewsWe now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: