Warranty Expense

USA Discussion in 'General Accountancy Discussion' started by Jason Taylor, Feb 14, 2017.

  1. Jason Taylor

    Jason Taylor

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    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.
     
    Jason Taylor, Feb 14, 2017
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  2. Jason Taylor

    Fidget VIP Member

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    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
     
    Fidget, Feb 16, 2017
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