Warranty accrual accounting reference
https://www.accountingtools.com/articles/2017/5/14/warranty-accounting
Rudimentary overview
A product will be sold and its performance is warrantied within a specific period (time, number of cycles).
For each unit sold, an amount of the sale is collected in an account designed for warranty accrual.
The amount is sometimes determined through reliability testing (aka survival analysis) to project how many units might fail, and for what reasons, within the warranty period. This allows an estimate of the projected costs of the warranty program, including parts, labor to repair, replacements, and costs of administration and logistics of the warranty program.
If the reliability assessment shows excessive costs or some other mismatch between expected product life and the warranty program, the product design might be improved.
The warranty program might aim for net-zero benefit (amount of warranty accruals equals those of the warranty program costs), or it might aim for net benefit (costs are less than the amounts accrued).
When a warranty claim is made, the cost of the claim can be applied to the warranty accrual account (decreasing the amount in the account).
Where a warranty on a product exists but the company does not use warranty accrual accounting, the costs of repair under warranty might be taken as expenses of the plant/company. This can inflate expenses, and makes it difficult to know the lifetime costs of the product and costs/benefits of the warranty.