What is the process of allocating the cost of plant and equipment to the periods that benefit from the use of those assets called?

The process of allocating the cost of plant and equipment to the periods that benefit from their use is known as depreciation accounting. This method systematically reduces the recorded cost of a tangible fixed asset over its useful life. The rationale behind this practice is that assets lose value over time due to wear and tear or obsolescence, and it is important for financial statements to reflect this reduction in value.

By using depreciation accounting, businesses can match the cost of using an asset with the revenue that the asset helps to generate during each period, providing a more accurate picture of financial performance. Different methods of depreciation, such as straight-line or declining balance, can be applied to reflect varying patterns of asset usage over time, further aiding in financial reporting and tax calculations.

Capitalization, while related, refers to the initial recording of the cost of an asset on the balance sheet rather than the allocation of its cost over time. Amortization typically pertains to the allocation of costs associated with intangible assets, and asset management involves broader strategies regarding the upkeep and utilization of assets rather than their cost allocation.