Substance over Form & Periodicity Concept
Substance over form
Substance over form means that transactions should be accounted for and presented in accordance with their economic substance, not their legal form.
An example of substance over form is that of assets acquired on hire purchase. Legally the purchaser does not own the asset until the final installment has been paid. However, the accounting treatment is to record a fixed asset in the accounts at the start of the hire purchase agreement. The substance of the transaction is that the business owns the asset. The same could be said of assets acquired under long term lease.
The time interval concept (Periodicity concept)
The activities of an entity are conveniently split up into blocks of time, be these days, months, quarters or years. The activities continue to occur but the intervals are placed so as to record activities between two points in time. The time intervals under consideration are usually of equal length to facilitate comparison, but this does not need to be the case. Therefore accounts are usually prepared annually.