Written by Fmi.Online Thursday November 10, 2022
A warranty is a seller’s obligation to fix or replace a product that breaks or stops 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.

In a nutshell :

  • Warranties often have conditions limiting the warranty.
  • The buyer must fulfill certain duties for the warranty to be honored by the manufacturer.
  • Some of the most common warranties are expressed, implied, extended, and special warranty deeds.
  • The Magnuson-Moss Warranty Act was created to protect consumers from fraud and misrepresentations.
  • A guarantee is a promise from a seller that their product will meet certain quality and performance standards.
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