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In this session, we discuss accounting for warranties or guarantees, which are used interchangeably. A guarantee is a promise made by the seller or manufacturer to make the customer whole if the product does not meet specifications or breaks within a certain period of time. This topic is important for revenue recognition because companies may make sales in year one and offer warranties that extend into year two and three. The company will make a sale in year one and provide a warranty, potentially impacting revenue recognition.
