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Accounting for Warranty Work

BwanapBwanap Member Posts: 7

I'm a single member LLC (handyman) and I'm trying to figure out the best way to handle warranty work. From general reading I'm thinking that in the Chart of Accounts I create items for warranty labor and materials (whatever as needed), then create an invoice for a customer called "2018 warranty" say (and the actual customer info can go on that particular invoice). Once I mark this as paid, I then need to add a journal entry I believe? Not sure what those debit and credit lines should be though. Does this sound, right? Is there a better way?

in Accounting Technical Support

Comments

  • AlexiaAlexia Member Posts: 3,314 ✭✭✭✭

    Hi @Bwanap,

    Could you give me a bit more information? I'm not sure what you mean by "Warranty work".

    If you mean work done for free as a result of a warranty, you wouldn't need to create an invoice since you aren't getting paid for that work. You would just need to account for raw material used in the process, if any. There would be a few ways to account for that.

    Tell me a bit more about how you manage that kind of work on your end and I'll see if I can't help you make sense of the accounting.

  • BwanapBwanap Member Posts: 7

    This may actually be more of an accounting/business question. I would think that warranty labor cost (so not actually being paid but spending the time to fix) can and should be deducted from profit in general and perhaps even against that particular customer if possible. If I had paid a sub (or employee but I don't have any) that would hit my books as an expense, should be a way to expense my own labor cost.

  • AlexiaAlexia Member Posts: 3,314 ✭✭✭✭

    You are right @Bwanap, this question is probably best answered by an accountant.

    For any material you would use, you'd be creating an expense to the appropriate category.

    As for your hours, unless you are actually paying yourself for that work, it wouldn't be counted as an expense since no money moves out of your bank account. If you are paying yourself hourly for that work, then you could record that work as an expense and keep track of it that way. But the important thing is that you accounting needs to reflect the movements in your bank accounts.

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