Entropy generation, formulated by combining the first and second laws of thermodynamics with an appropriate thermodynamic potential, emerges as the difference between a phenomenological entropy function and a reversible entropy function. The phenomenological entropy function is evaluated over an irreversible path through thermodynamic state space via real-time measurements of thermodynamic states. The reversible entropy function is calculated along an ideal reversible path through the same state space. Entropy generation models for various classes of systems—thermal, externally loaded, internally reactive, open and closed—are developed via selection of suitable thermodynamic potentials. Here we simplify thermodynamic principles to specify convenient and consistently accurate system governing equations and characterization models. The formulations introduce a new and universal Phenomenological Entropy Generation (PEG) theorem. The systems and methods presented—and demonstrated on frictional wear, grease degradation, battery charging and discharging, metal fatigue and pump flow—can be used for design, analysis, and support of diagnostic monitoring and optimization.