Saunas4U Pty Ltd uses high-quality components in manufacturing of its water filters. However, some manufacturing defects are unavoidable. For the year ended 30 June 2020, Saunas4U Pty Ltd recorded $950,000 of net sales. Based on prior period, around 1% of net sales are claimed as warranties. The owners believe the warranty amount should be expensed in the period when the claims take places which is normally in the period following the sale.

With reference to the Conceptual Framework, explain whether you agree with the owners on recording of warranties as an expense in the period the claims are made. If not, explain how warranties should be recorded and provide a double-entry to record warranties for the year ended 30 June 2020.