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hello and welcome to the session in which we will discuss guarantee and warranty cost what is the main idea well what is a warranty lets talk about a warranty or a guarantee basically its a promise made by a seller when you buy something to a buyer to make the buyer good in case of deficiency of quantity quality or performance in the product simply put when you buy an item you want to have some assurance some type of assurance that this item is going to work the way you would expect now to encourage you to buy this item either the retailer or the manufacturer they will provide you some sort of a warranty well thats fine so what is complicated when it comes to guarantee and warranty why do we have to treat it in a separate recording why is that important the importance of it it becomes part of the matching principle what does that mean let me give you an idea how it works lets assume in year one a retailer make a sale in year one and they sell they sold something for ten thousand d