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In simple English it means the “economic reality” of an accounting transaction, not its “legal framing” by the law. Eg, when you take a mortgage, the bank will retain ownership (tittle) of the house. In law, the house belongs to the bank till you finish paying for it….., but from an accounting point of view, you own the house. The bank doesn’t live in the house. You do. You enjoy all the benefits of living in the house. Thus in accounting, you own the house, and as such you account for it as your asset. very simplified, but hope you get the drift.
BPP is correct. This is because there is an accounting date(30 April 2013) ending in the 2nd Tax year(2013/14.., ie from 6 April 2013 to 5 April 2014). The end of the accounting date is IN 2013/14. Now, you check if from the start of trade to that date falling in the second tax year is more or less than 12 months. In this case, it is LESS than 12 months, thus the basis period for the 2nd tax year will be 12 months from the start of trade.