263 Warranty Claims

Assets

Receivables

Synopsis

Account 263 is established to record the amount of Warranty and Transportation Claims that are due to the dealership from the manufacturer.

Debits

Credits

The amount of Warranty claims due from the factory
The amount of Transportation claims due from the factory
The amount of Adjustment for the difference between the month-end schedule and the account balance

The amount of Credits received from the factory
Invalid claims rejected by the factory
The Adjustment for the difference between the month-end schedule and the account balance

Example 1

Record a $755 warranty repair order for a customer’s car. The warranty claim labor sale is $170 and the warranty claim parts sale is $585. The warranty claim cost of labor is $50 and the warranty claim cost for parts is $450.

Journal: Warranty Sales

Entry:		Debit	Credit
Account 263	Receivables – Warranty Claims	$755
Account 662	Cost of Sales – Warranty Claim Labor – Mechanical	$50
Account 680	Cost of Sales – Warranty Claims – Parts & Accessories	$450
Account 242	Inventory – Parts & Accessories		$450
Account 247A	Inventory – Work in Process – Mechanical		$50
Account 462	Sales – Warranty Claim Labor – Mechanical		$170
Account 480	Sales – Warranty Claims – Parts & Accessories		$585

Example 2

Record the $720 payment from the manufacturer for the above warranty claim. The amount paid has been adjusted by $35 for a reduction in the parts payment.

Journal: Purchase

Entry:		Debit	Credit
Account 300	Accounts Payable – Trade Creditors	$720
Account 480	Sales – Warranty Claims – Parts & Accessories	$35
Account 263	Receivables – Warranty Claims		$755

Example 3

Record the $755 write-off of the above warranty claim for not being submitted timely.

Journal: General Journal

Entry:		Debit	Credit
Account 067-05	Policy Work Expense – Service	$170
Account 067-07	Policy Work Expense – Parts & Accessories	$585
Account 263	Receivables – Warranty Claims		$755

Comments

A debit balance represents unpaid warranty and transportation claims due from the factory.

Transactions, which are related, should be recorded in separate sub-accounts. Sub-accounts serve to keep records organized for future analysis and auditing. The sub-accounts in these examples are designated by a letter following the account number (suffix). Please refer to your DSP's instructions for establishing sub-accounts.