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This session discusses guarantee and warranty costs, explaining that a warranty is a promise made by a seller to a buyer to ensure the quality, quantity, or performance of a product. Retailers or manufacturers offer warranties to provide assurance to buyers. Guarantee and warranty costs are important because they are part of the matching principle, which ensures that expenses are recorded in the same period as the revenue they generate. For example, if a retailer sells a product for $10,000 in year one, they need to account for the associated warranty costs in the same period.
