Limousine owners invest substantial resources in maintenance and repairs, ensuring their vehicles remain mechanically sound. Depreciation helps owners reduce corporate operating income and tax liabilities.
Limousine depreciation guidelines are procedures that corporations and small business owners follow when allocating the costs of vehicles over several years. Limousine owners depreciate vehicles over five years, in accordance with Internal Revenue Service (IRS) regulations. Limousines are considered long-term assets because they serve in operating activities for more than a year.
Under IRS rules, a limousine owner may depreciate the vehicle using a straight-line or accelerated method. The straight-line depreciation method enables the owner to allocate the same amount each year. In an accelerated method, the owner depreciates larger amounts in earlier years.
To record the depreciation of a limousine, a corporate accountant debits the depreciation expense account and credits the accumulated depreciation account. Depreciation expense is an income statement account. Accumulated depreciation is a balance sheet item. A balance sheet is also called a statement of financial position.