Since many Shop Trac users have not been using a fully integrated real time accounting system before there seems to be some confusion on how to handle warranties, either OEM or your own in-shop warranty. This bulletin should help to clear up some of the confusion.

Since many of our users are involved in the diesel injection business, we will use an example of a Stanadyne DS warranty. This will serve as a excellent example, since it is more complex than most warranty procedures. The Stanadyne DS warranty is unique in that when a customer requires warranty, they receive an off the shelf exchange unit. The suspect unit is then processed for warranty.

All warranty procedures require some unique general ledger accounts. We recommend that you add the following accounts to the 'Revenue Section' (accounts that begin with a 4) of your chart of accounts. You do not need to use the exact same numbers, but the numbers are provided here to make this example as clear as possible.

You should also add a customer account for each of the OEM's that you perform warranty for. To keep things organized you may wish to assign account numbers that would keep all these accounts together.

The Stanadyne DS warranty would involve the following steps. Most other warranties would have the same general procedure, although you may be able to eliminate some of the steps.

1. When requested supply your customer with an off the shelf rebuilt unit. Invoice this unit at 100% discount. This provides a N/C invoice for your customer, and removes the unit from your inventory. Make sure that the 'Job History' is updated to insure that you can refer back to this invoice via the serial number should this unit ever require further service.

2. Rebuild/repair as required the suspect unit as required under the applicable warranty policy. Use the Transaction | Inventory | Assemblies option to remove the parts used, and to add the rebuilt/repaired unit into inventory. Do not assign any value to labour charges. Print 2 copies, 1 to keep with the repaired/rebuilt unit, and the other as a file copy. Assign a warranty claim number, and complete the 'Description' field of the resulting transaction with this number.

3. Make out your warranty claim as usual.

4. Issue an invoice to the OEM customer account to whom this warranty applies. Do NOT invoice the parts used (they were already taken out of stock), but use the 'Labour/ Additional Charges' section to include the following (some of these items may require a manual calculation):.

In Canada you must also include GST, but not PST on this invoice. Before the invoice is posted, change the 'Description' field on the transaction screen to the warranty claim number to simplify future reference.

5. Normally your warranty payment will come in the form as an accounts payable credit from the OEM, or the OEM's distributor. Use the Transaction | Payable | Ledger option to input this credit. The total amount would be posted as a 'Credit' to the 'Warranty Clearing' GL account, and as a 'Debit' to the 'Accounts Payable' GL account. Complete the 'Description' field with the warranty claim number.

6. Use the Transaction | Receivable | Ledger option to input a credit to accounts receivable for this entry. The total amount of the credit would be input as a 'Credit' to 'Accounts Receivable' GL account, and as a 'Debit' to the 'Warranty Clearing' GL account. Once again complete the 'Description' field with the warranty claim number.

7. If the amount paid in step 5 and 6 does NOT equal the amount invoiced in step 4, then note any differences and issue an adjusting receivable entry using the Transaction | Receivable | Ledger option. The difference if you were underpaid would be input as a 'Credit' to the 'Accounts Receivable' GL account. The amount of GST that was not paid would be posted as a 'Debit' to the 'GST Collected' GL account, and the amount of warranty (either parts and/pr labour) not paid would be posted as a 'Debit' to the 'Warranty Over/Under' GL account. If you were overpaid, then the 'Debit' and 'Credit' entries would be reversed. Once again complete the description field with the warranty claim number.

8. To clear these items from accounts receivable use the Transaction | Receivable | Payments option to select these documents (the grand total of which should be zero) and then purge them.

Most OEM warranties are considerably simpler than the Stanadyne DS program. In these cases where a customers unit is being repaired and returned to the customer you could skip steps 1 and 2, and simply invoice the actual parts and labour in step 4. This does NOT however provide a N/C invoice for the customer, although a N/C invoice is easily generated providing in this case that NO parts are included on such an invoice (the parts would have been removed from inventory when the invoice to the OEM was issued).