Which of the following best describes the cash-basis method of accounting for warranty costs?
A) Expensed based on estimate in year of sale.
B) Expensed when liability is accrued.
C) Expensed when warranty claims are certain.
D) Expensed when incurred.

Question

Quizplus · Accepted Answer

The cash-basis method of accounting for warranty costs involves recognizing expenses when they are actually incurred, which aligns with option D. This method does not estimate future costs or accrue liabilities in advance but waits until the costs are realized.

Which of the Following Best Describes the Cash-Basis Method of Accounting