Future warrantee claims should not be recorded as a liability in the balance sheet as there is no objective evidence as to the amount that will be claimed.

Question

Quizplus · Accepted Answer

According to accounting principles, future warranty claims should be recorded as a liability in the balance sheet if it is probable that customers will make claims and the amount can be reasonably estimated. This is in accordance with the matching principle, which requires expenses to be matched with the revenues they help to generate.

Future Warrantee Claims Should Not Be Recorded as a Liability