Accounting How to Calculate Salvage Value refers to the process of determining the estimated value of an asset at the end of its useful life. For instance, a company may need to calculate the salvage value of a vehicle or machinery before selling or disposing of it.
Calculating salvage value is crucial for accurate financial reporting and decision-making. It aids in determining the depreciation expense and net income, and it influences the timing of asset disposal. Historically, the concept of salvage value emerged during the Industrial Revolution when businesses sought methods to account for the residual worth of depreciated assets.
