SUBSTANCE OVER FORM

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.