agreement by the seller of goods or services to satisfy for a stated period of time deficiencies in the item's quality or performance. Warranty terms may be included on the buyer's receipt. The warranty usually provides for repair or replacement of the item in the case of malfunctioning or poor workmanship. Typically, there is no additional charge during the warranty period. The seller records warranty expense and related estimated liability in the year of sale. A warranty percentage is usually based on prior experience. Assume sales for 2000 are $100,000. Estimated warranty cost is 2% of sales. The entry to record warranty expense is:

If on 1/25/2005, actual warranty services performed cost $500, the entry is:

contract between the seller and the buyer of a product specifying the conditions under which the seller will make repairs or remedy other problems that may arise, at no additional cost to the buyer. The warranty document describes how long the warranty remains in effect, and which specific repairs will be performed at no extra charge. Warranties usually cover workmanship or the failure of the product if used normally, but not negligence on the part of the user if the product is used in ways for which it was not designed. Warranties are commonly issued for automobiles, appliances, electronic gear, and most other products. In some cases, manufacturers will offer extended warranties for several years beyond the original warranty period, at an extra charge. Consumers should consult federal and state laws for more extensive applications or interpretations of warranties.

statement, either written or implied, that assertions made in completion of a contract are true. For example, a seller's claim in a warranty deed that the property being sold has a marketable title. In mortgage banking, a lender's claim that loans offered for sale to a secondary market conduit meet the buyer's specifications for pooling with other loans and are not in arrears. Under a warranty agreement, the buyer has recourse against the seller. A seller-servicer of loans sold in the secondary mortgage market agrees to buy back an agreed-upon portion of losses from borrower defaults.

guarantee given by a seller to a buyer that the goods or services purchased will perform as promised, or a refund will be given, an exchange made, or a repair done at no charge. Warranties usually become effective when the manufacturer receives a warranty application from the buyer (not at the date of purchase) and are effective for a limited period of time. Warranties usually include limitations that exclude defects not caused by the manufacturer.

The warranty application form typically contains requests for demographic and other marketing information about the buyer such as marital status, occupation, age, income, where and when the item was purchased, and why that brand was selected. Direct marketers maintain lists of individuals who have completed warranty applications, and use the data for promotion list enhancement .

pledge by an insured in writing, and a part of the actual contract, that a particular condition exists or does not exist. For example, an insured warrants that a sprinkler system works. In exchange, the insurance company charges a reduced premium for fire coverage. Statements by an insured in an application for property insurance are deemed to be warranties, not representations, as is generally the case in life insurance policy applications.

a promise contained in a contract .

Example: The vendee received a one-year warranty from the builder as to the structural soundness of the property.

guarantee given by a seller to a buyer that the goods or services purchased will perform as promised, or a refund will be given, an exchange made, or a repair done at no charge. Warranties usually become effective when the manufacturer receives a warranty application from the buyer (not at the date of purchase) and are effective for a limited period of time. Warranties usually include limitations that exclude defects not caused by the manufacturer.