What is scrap value?

Definition of Scrap Value

In cost accounting, scrap value refers to a relatively insignificant amount that a manufacturer receives from the sale of production materials that remain after the manufacture of its products.

In financial accounting, the term scrap value might be used instead of the more common terms of salvage value, disposal value, or residual value when calculating the depreciation of an asset used in the business. In this situation, scrap value is the expected or estimated value of the asset at the end of its useful life.

Examples of Scrap Value

A manufacturer of aluminum products melts aluminum. In the process it separates out small amounts of aluminum containing impurities. The relatively small amount of money that the manufacturer receives for the impure aluminum is known as the scrap value.

For examples of scrap value that is meant to be the disposal, residual, or salvage value of a plant asset, see our major topic Depreciation.