What two types of warranties are mentioned in the study material?

The correct option highlights two specific types of warranties commonly discussed in financial accounting: assurance warranties and service-type warranties.

Assurance warranties promise that a product will function as intended for a certain period; they are typically included in the sales price and do not incur an additional cost to the consumer. These warranties are seen as part of the product's overall offer and guarantee that the product meets specific performance standards.

Service-type warranties, on the other hand, extend beyond a basic assurance and often require an additional purchase. They provide repair or maintenance services for the product over a specified period, thus representing a separate performance obligation. Accounting for these warranties differs from assurance warranties, as service-type warranties need to be recognized as revenue over the period they are expected to be used.

Understanding these two types of warranties is critical in accounting because they affect how revenue is recognized and how liabilities are recorded, ultimately impacting the financial statements of a company.