What is the residual value?

The residual value has two potential meanings depending on the situation. In a leasing situation, such as renting a car or renting office equipment, the residual value is the expected remaining value that the rented item will have after its return. However, for the purposes of accounting and taxes, the residual value concerns the depreciated item value. This fee is based on the item value. It is also based on the expected value of the item after its return.

For example, assume that a person rents a vehicle of $ 50,000 (USD). It will use the car for two years when it has to return the car. Therefore

Because the car will still have the value of the value is returned, the person who rented a car should not pay as if using a value of $ 50,000 (USD). Instead, the residual value is determined. For example, a car may have atReturn value of $ 30,000 (USD). The amount of interest the Leasee is charged and the amount of monthly payments to be used for the use of the vehicle is based on a calculation of $ 50,000 minus $ 30,000 USD to find that it receives $ 20,000 from the use of the vehicle.

In the accounting context, the residual value has a different meaning. When used in the balance sheet of assets and expenditure, the depreciated item value is referred to as its residual value. In other words, the deadline concerns the value left in the item.

Suppose, for example, the company will buy a computer. This computer will be used and aged. Like that, its value will be reduced or depreciated.

When the company states its asset, the computer should still be listed as an asset because the company still owns it. However, the value is not the full value that the company paid for the computer. Instead, the residual value or current amount in which the computer has a value in a state in the state ofwhich is.