305 Warranty Claims Advance
Liabilities
Accounts Payable
Synopsis
Account 305 is established to record the amount of credit given to the dealership from the manufacturer to compensate for the time that it takes to processes warranty claims.
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Debits |
Credits |
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Example 1
Record the initial advance on unpaid warranty claims in the amount of $25,000.
Journal: Purchase
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Entry: |
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Debit |
Credit |
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Account 300 |
Accounts Payable – Trade Creditors |
$25,000 |
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Account 305 |
Warranty Claims Advance |
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$25,000 |
Example 2
Record the decrease in the warranty claims advance in the amount of $3,367.
Journal: Purchase
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Entry: |
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Debit |
Credit |
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Account 305 |
Warranty Claims Advance |
$3,367 |
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Account 300 |
Accounts Payable – Trade Creditors |
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$3,367 |
Comments
A credit balance represents the amount advanced by the manufacturer for unpaid warranty claims.