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In this session, we will discuss guarantee and warranty costs. A warranty is a promise made by a seller to a buyer to ensure the product's quality, quantity, or performance. It provides assurance to the buyer that the item will work as expected. Guarantee and warranty are important for the matching principle in accounting. For example, if a retailer sells something for $10,000 in year one, the warranty cost will be recorded in the same period. This ensures accurate financial reporting.
