What is the salvage value of property?

The salvage value of property refers to the estimated value that an asset will realize upon its sale at the end of its useful life. This value is essential for accounting and financial calculations, particularly in determining depreciation. By estimating the salvage value, a business can spread the initial cost of the asset over its useful life while considering what the asset might still be worth when it is no longer in use.

It's important to differentiate this from the initial purchase price or market value at various points in time. The initial cost is simply the amount paid for the asset, while market value reflects the asset's current value based on market conditions, which can fluctuate. Understanding salvage value is crucial for accurate financial planning and asset management, as it impacts the overall depreciation expense recorded in financial statements.