I have just taken over the books for a truck repair shop, we do a lot of warranty work and so far they simply do up the work order and zero out the prices. This doesn't seem to me to be the proper practice - in my minds eye it should be going to a warranty expense account. Am I out to lunch or is he really shooting himself in the financial foot by doing it the way he is?

If he is reimbursed for the warranty work by the home offi ce, then, yes, a separate account should be maintained.

If it is his OWN warranty work, then zeroing out is okay.

Thank you, he is an independent shop so his current method will be maintained :)