Manufacturer’s warranty costs are booked as debits in cost of sales after a warranty-related event occurs. Following the event (and application of administrative and authoritative warranty criteria to the event), the manufacturer books their costs accordingly.

An extended warranty is additional warranty coverage purchased by the customer, which is a debit to cash or A/R, and a credit to a liability related to the item now covered under warranty. (The treatment is similar for deferred/unearned revenue). If there are any claims during the extended warranty period, you debit the liability and credit the appropriate revenue account. If there are no claims, then the remainder is recognized as revenue once the extended warranty period expires. (Don’t forget to book the appropriate amount for cost of sales, if any, when you book revenue.)