Warranties are honoured as part of good business practice: keep your customers happy. Whether to honour a
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Warranties are honoured as part of good business practice: keep your customers happy. Whether to honour a claim, and how much cost to incur, are managerial judgements that depend on how good the customer is, what the reputation effects are, and so on. Therefore, warranties are discretionary period expenses like donations. There is no accrual for future donations. Why is there an accrual for future warranty costs?
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The concept of warranties and accrual accounting can sometimes seem contradictory but there are specific reasons why there is an accrual for future warranty costs even though warranties are considered ...View the full answer
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Related Book For 
Financial Accounting An Integrated Approach
ISBN: 9780170411028
7th Edition
Authors: Ken Trotman, Elizabeth Carson
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