🌞Today's Finance Jargon
'Expense Warranty Method'
It is the generally accepted method of accounting for warranty expense and liability and should be used whenever the warranty is an integral and inseperable part of the sale that creates a warranty loss contingency. The estimated warranty expense and associated liability are recorded in the year of the sale of the product for which the warranty applies. Actual warranty expebditures when they occur are charged to the estimated liability. The expense method provides for the proper matching of warranty expense to the product revenue through accrual accounting.