What is the term for allocating the cost of a fixed asset over its useful life?

The term that refers to allocating the cost of a fixed asset over its useful life is depreciation. This accounting method is used to systematically reduce the carrying amount of a tangible fixed asset over time, reflecting its gradual consumption, wear and tear, or obsolescence. By doing this, businesses can match the asset's cost with the revenue it generates over its useful life, allowing for accurate financial reporting and tax calculations.

Amortization, while similar to depreciation, specifically applies to intangible assets rather than tangible fixed assets. Appreciation refers to an increase in the value of an asset over time, which is opposite to the concept of reducing an asset's value through depreciation. Capitalization involves recording a cost as a long-term asset rather than an expense, but it does not directly address the allocation of cost over time like depreciation does. Therefore, depreciation is the most accurate term for this process in the context of fixed assets.