Warranty Liability Long-Term

Definition: Warranty costs expected beyond 12 months

Scope:NarrowDifficulty:Moderate

Warranty costs expected beyond 12 months

Common Journal Entries
AccountDebitCredit
1. Estimate long-term warranty
5-year warranty; $15,000 expected claims beyond 1 year.
Warranty ExpenseExpense+$15,000
Warranty Liability (Long-Term)$15,000
Non-current liability for future warranty obligations.
2. Honor warranty claim
$3,000 repair in Year 3.
Warranty Liability (Long-Term)$3,000
CashAsset−$3,000
Liability reduced as claims are paid.

T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.

Warranty ExpenseWarranty ExpenseExpenseA cost incurred in the process of earning revenue. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$15,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$15,000.00
Warranty Liability (Long-Term)Warranty Liability (Long-Term)AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$3,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$15,000.00
$12,000.00
CashAsset account. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$3,000.00
$3,000.00
DurationLong-Term

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