Substance over form is a principle in accounting and law that prioritizes the economic reality of transactions over their legal or formal structure. This approach ensures that financial statements and legal interpretations reflect the true nature of transactions, providing a more accurate representation of a company's financial position or legal obligations.

Substance Over Form

Substance over form

principle in accounting

Principle in law

economic reality of transactions

legal or formal structure

Financial statements are formal records that provide an overview of a company's financial performance and position, crucial for stakeholders to make informed decisions. They typically include the balance sheet, income statement, and cash flow statement, each offering unique insights into different aspects of the company's financial health.

financial statements

legal interpretations

true nature of transactions

accurate representation

company's financial position

Legal obligations are duties that are enforceable by law, requiring individuals or entities to act or refrain from acting in certain ways. These obligations are foundational to maintaining order and fairness in society, as they ensure accountability and predictability in legal relationships.

legal obligations

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