Extended Warranty Purchase by Customer, Billed from Manufacturer

Lisa NY · ‎November 10, 2022

A customer would like to purchase an extended warranty for $15000.00.

The manufacturer will in turn bill my company for the $15,000.00 to which I am to pay.
How do I set up an ITEM for an extended warranty?

It is considered a SERVICE or OTHER CHARGE?

For ACCOUNT, do I select I set up EXTENDED WARRANTY with the type INCOME?
Then when I receive the bill from the manufacturer, do I need to set up another ITEM pointing towards EXPENSE? Basically it's a pass thru.

Please let me know if I am totally off base here and the correct steps to set up! Thanks!

Rainflurry · ‎November 10, 2022

@Lisa NY

You're not off base at all. Since this is a pass-through item (there's no mark-up, correct?), I would suggest using an Other Charge item. To do this: first, create an other current liability account called "Due to Extended Warranty Co." or something similar. Then, create an Other Charge item called Extended Warranty (or whatever) and assign the newly-created "Due to Extended Warranty Co." liability account under the "Account" drop-down. You can then use that item on the invoice. That item will put the $15K into the "Due to Extended Warranty Co." liability account until you get billed from the manufacturer. Use that same account on their bill and it will pass through.

Lisa NY · ‎November 10, 2022

Thank you so much for the quick reply and for helping me accurately capture costs! This was a tremendous help! : )

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Extended Warranty Purchase by Customer, Billed from Manufacturer

Extended Warranty Purchase by Customer, Billed from Manufacturer

Extended Warranty Purchase by Customer, Billed from Manufacturer

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