The accounting for warranty cost is based on the expense recognition principle, which requires that the estimated cost of honoring warranty contracts should be recognized as an expense

Question

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The estimated cost of honoring warranty contracts should be recognized as an expense in the period in which the product was sold, in accordance with the expense recognition principle. This matching principle requires expenses to be recognized in the same period as the revenue they helped to generate.

The Accounting for Warranty Cost Is Based on the Expense