Make a Guaranteed Sale

In this FAQ, we cover the following topics:

1. Revenue

2. Reserve

3. When a Warranty Repair is Performed

4. If the Warranty Expires without a Claim

5. Practical Recommendations for Repair Shops / Dealerships / GEM-CAR

6. Tax Implications

General Ledger Account Type

1. Revenue

Revenue account:

• 4050 – Extended Warranty Revenue

Type:

• Revenue / Income

2. Reserve

Liability account:

• 2280 – Extended Warranty Reserve
• or:
• 2275 – Warranty Provision

Type:

• Current Liability

This is NOT immediate revenue.

It is an amount set aside for future claims.

3. When a Warranty Repair Occurs

Example:

Repair = $150

The reserve decreases as claims are made.

4. If the Warranty Expires without a Claim

At the end of the period: you can transfer the remaining balance to revenue.

5. Practical Recommendation for Workshops / Dealerships / GEM-CAR

Suggested GL Accounts

6. Tax Implications

In Quebec/Canada:

• the sale is normally taxable
• the reserve is for accounting purposes only
• GST/QST are collected on the total sold

Therefore:

• taxes on 100%
• revenue recognized partially depending on your accounting method