If expense due to warranty claim

Here are the journal entries for warranty claim expenses:

1. When Warranty Claim is Recognised (Provision at time of sale, if provision method is followed):
Dr. Warranty Expense A/c           Rs. 2,000
Cr. Provision for Warranty A/c     Rs. 2,000

2. When Actual Warranty Repair is Carried Out (utilising the provision):
Dr. Provision for Warranty A/c     Rs. 2,000
Cr. Materials Used / Labour A/c    Rs. 2,000
(or Cr. Cash/Creditor if third-party repair)

3. If No Provision was Made Earlier (Direct expense method):
Dr. Warranty Expense A/c           Rs. 2,000
Cr. Cash / Creditor A/c           Rs. 2,000

4. Delivery Charges to Return Product to Customer:
Dr. Warranty / Delivery Expense A/c Rs. 100
Cr. Cash / Courier Payable A/c        Rs. 100

5. Combined Entry (if treating all warranty-related costs together):
Dr. Warranty Expense A/c             Rs. 2,100
Cr. Cash / Creditor A/c             Rs. 2,100
(being warranty repair cost Rs. 2,000 + delivery Rs. 100)

Note: Under Ind AS 37, warranties that are part of the original sale must be recognised as a provision at the time of sale based on estimated liability. The actual costs are then charged against this provision when incurred.

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Atharv Sankliya

Aashok Kumar Sharma

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