The accounting for warranty costs is based on the
A) going concern principle.
B) expense recognition principle.
C) conservatism principle.
D) full disclosure principle.

Question

Quizplus · Accepted Answer

The accounting for warranty costs follows the expense recognition principle, which states that expenses should be recognized in the period in which they are incurred, not necessarily in the period when payment for the expenses is made. Warranty costs are recognized as expenses in the period in which the sale is made, even though the actual cost of the repairs may occur in a later period. This ensures that the expenses of the sale are matched with the revenue earned.

The Accounting for Warranty Costs Is Based on the