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hello and welcome to this session in which well discuss accounting for warranties or guarantees in this session the the warranty and guarantees are used interchangeably so what is a guarantee well when you purchase something a car a tv a stereo whatever you are buying a piece of furniture the seller or the manufacturer offer you a guarantee in other words if something happened to that product if it doesnt meet certain specification if it breaks within a certain period of time we will make you whole thats what a guarantee is so its a promise that the product meets certain specification in the contract otherwise we will make you whole we would replace it fix it whatever we have to do now why is this topic important for revenue recognition well heres why because companies might make sales in year one and gives warranty and that warranty could run through year two and year three simply put heres whats going to happen the company will make a sale here in year one then they will offe
