Salvage Value is a key concept in accounting and finance. It represents the estimated residual value or the worth of an asset once its useful life has been fully utilized. This value is determined at the time of purchase or first usage of the asset and serves as a basis for calculating depreciation. During the life of the asset, the difference between the initial cost and the salvage value, divided by the asset's useful years, calculates annual depreciation. For example, if a company buys machinery for $10,000, expects to use it for 10 years, and estimates it can sell the scrap for $1,000 after its use, that $1,000 is the salvage value.