USA Warranty Expense

[Jason Taylor]

I understand the warranty expense and having to match the expense to the revenue and creating a liability based on a warranty estimate. However, please explain how to adjust the liability and expense when my estimate becomes overstated or understated.

If I do not use all the liability during my warranty period, how do I adjust the liability to zero for that warranty period?

Hope that makes sense.

 

[Fidget]

It's the same principle as a provision for bad debt.

To increase it: Dr P&L and Cr Balance Sheet
To decrease it: Dr Balance sheet and Cr P&L