Final answer:
The process used to allocate the cost of physical assets over their future service life is called depreciation. Depreciation is a method used in accounting to spread the cost of an asset over its useful life.
Step-by-step explanation:
The process used to allocate the cost of physical assets over their future service life is called depreciation. Depreciation is a method used in accounting to spread the cost of an asset over its useful life. There are several methods of depreciation, including straight-line depreciation and declining balance depreciation.
For example, let's say a company purchases a machine for $10,000 and expects it to last for 5 years. Using the straight-line depreciation method, the company would allocate $2,000 ($10,000 divided by 5) as a depreciation expense each year for the next 5 years.
By allocating the cost of physical assets over their future service life, companies can accurately reflect the usage and economic value of the assets over time.