How Do I Handle Warranty Reserves in ESC Accounting?


Warranty Reserve is a function of Job Costing and is used to set aside a portion of the job for future costs just before the job is closed. The amount of money and the length of the warranty can differ from job-to-job.


Go to Company → System Setup → Accounting and place a check in the Enable Work-in-progress Accounting box.

Four additional accounts will need to be added to your Chart of Accounts by going to Company → Enter Chart of Accounts. Setup the new accounts as shown below, you may use account numbers of your choosing, but be sure to use the category shown. Also, note the additional required fields on the Warranty Reserve account.

After the accounts are set up, go to Company → System Setup → System Accounts and enter the Warranty Holding and Warranty Reserve accounts in the appropriate fields.

We also suggest setting up job classes under Company → Enter Job Classes to help identify the warranty costs on your job reports. The job classes you will need are "Warranty Reserve Setup", "Warranty Labor", "Warranty Material", and "Warranty Other".

If you are using payroll in ESC, Warranty Labor wage items will need to be setup using the Warranty Reserve account as your expense account.

Go to Employees → Enter Employees double-click on an employee to edit their profile.  Go to the Payroll tab and apply the Warranty wage item to any employees who may be doing warranty work.

From Sales → Enter Billing Codes, set up a billing code - as shown below - to show the warranty cost on the original job and move it to warranty reserve.

If you will be using billing codes instead of part numbers, use the Billing Code example below to setup a warranty material billing code. Only warranty material costs will be entered on the invoice, so you will leave the income account blank, use the Warranty Reserve account in the Cost Debit Account field and the Inventory account for the Cost Credit Account field.

The Process

Transferring warranty costs from the original job to the warranty job

In the example below, we will be moving 2% of a ten thousand dollar job to warranty reserve.  The original job must be in open status.

Add the Warranty Reserve billing code to one of the invoices associated with the original job or create a No Charge Invoice.  Enter the amount set aside for warranty reserve as a cost with no retail price. It is recommended, but
not required, that you associate this item with the Warranty Reserve Setup job class.

Shown below is the journal entry generated by the WAR RES entry on the invoice.

Close the original job.

When a job is closed, ESC will see if there are any entries to the Warranty Reserve account under the original job. If there is, the following things will happen:

  • A new warranty job will be created, putting a W in front of the original job name with a Projected End Date one year from the current date.

  • A second journal entry will be made that debits the Warranty Holding account using the original job name, and credits the Warranty Reserve account using the new W job name.

  • The original job will be closed and the following message will appear:

Entering Warranty Costs

When entering time for payroll, use the warranty wage item, warranty labor job class and the W job number. Once the payroll checks are processed, the warranty labor cost will appear on your warranty job report.

Entering material costs to a warranty job can be entered one of three ways.

  • Accounts Payable - If items are being purchased directly for the warranty job, the material costs should be applied to the Warranty Reserve account when entering an AP bill. Be sure to include the W job number, warranty material job class, material or equipment cost type and the Department.

  • Inventory - If actual part numbers are being removed from inventory, you may use the Inventory Job Transfer screen and apply the costs to the Warranty Reserve account. Remember to enter the W job number, warranty material job category and the Department.

  • Sales Invoice - Costs can be entered with a No Charge Invoice using either part numbers or billing codes. If a part number is used with a W job, ESC will automatically substitute the Warranty Reserve account for the debit account set up in Inventory. Simply enter the part number and zero out the retail price.

Samples of Job Reports

The most widely used job reports are the Detail Job Report and the Job Profit and Loss Detail. These job reports are located under Company → Reports → Job Reports.

Job Report – Detail

Job Profit and Loss Detail

The Detail Job Report is a snapshot of the job, while the Job Profit and Loss shows more detail. On the Job Profit and Loss, you can see the transaction each line item came from and you can go to that transaction by clicking on the Document description. Both reports in our example show that 150.65 will be moved to the Warranty Adjustment account when the job is closed.

Closing the Warranty Jobs

Each month you will need to close all jobs for warranties that expire that month. The easiest way to get a list of the Warranty Jobs due to close in a particular month is by setting up a Custom View in the Job List under the Customer Info menu.

Below is a sample view to show warranty jobs expiring in the current month. To ensure you get all W jobs, we suggest you use the filters From – W-000000 (zeros) and To – W-ZZZZZZ, as shown in the sample below. The filters will return all open jobs starting with a W that have a projected end date sometime in the current month. If you will be closing the warranty jobs the month after they are due to close, use LastMonth in the Projected End Date filter instead.

When the list is displayed, you can simply click on the Job Name to bring up the Setup Job screen to close the job.  As the jobs are closed, they will be removed from the list. You can also print the list using the Print icon at the top of the screen.

Closing the job transfers the money from the Warranty Reserve account to your Warranty Adjustment Account.

A screen will appear showing the journal entry created by closing the job. Click Save to complete the transaction.


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