Business, Legal & Accounting Glossary
In a Contract, a warranty is a term of the contract that is not necessarily fundamental to its fulfilment. Breach of such a term, if established, gives the party not in breach the right to Damages, but does not allow him to treat the contract as discharged. For a more detailed description see: Conditions and warranties.
n. a written statement of good quality of merchandise, clear title to real estate or that a fact stated in a contract is true. An “express warranty” is a definite written statement and “implied warranty” is based on the circumstances surrounding the sale or the creation of the contract.
A warranty is a seller’s obligation to fix or replace a product that breaks or stop working properly in an agreed amount of time. In other words, a warranty is a contract or agreement between the seller and the buyer that requires the seller to replace defective products sold to the buyer.
Almost all retailers and manufacturers sell extended warranties. I’m sure you have been asked if you wanted to purchase one at some point in the recent past.
Accounting for warranties requires estimation and experience because not all products break. Retailers don’t have to fix or replace 100% of the products they sell warranties for. If they did, they might stop selling warranties because it would be too costly. When a retailer sells a product with a warranty to a customer, the retailer records the income from the sale and the cash received. It also records an estimate of the warranty expense.
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This glossary post was last updated: 28th December, 2021 | 0 Views.