- Basic requirements for organizing accounting
- Important accounting documents
- Cash and accrual methods of accounting
Accounting is an important part of your everyday activity and the goal is to keep records and obtain an overview of the company’s economic results and financial situation.
All companies and branches of foreign companies operating in Estonia are subject to accounting requirements. Every company’s accounting must conform to the standards set forth by the state, so that the results would be comparable and comprehensible. Accounting policies are set forth in the following documents: the Accounting Act of the Republic of Estonia, Estonia’s Good Accounting Practices and the guidelines issued by the Accounting Board of the Republic of Estonia.
Basic requirements for organizing accounting
- Accounting must be a true, objective and comparable view of the company’s financial situation, operating results and cash flows. The information presented must be salient.
- All economic transactions must be documented.
- All economic transactions must be entered into accounting ledgers and journals.
- Every company must prepare and file an annual report to the Commercial Register.
- All accounting documents must be kept on file.
Important accounting documents
Opening balance sheet
The first thing you must do after you become subject to accounting obligations is to prepare an opening balance sheet that lists the assets, liabilities and equity of your company before you commence economic activity.
Accounting policies and procedures
The company accounting policies and procedures is a document that governs the recognition and documentation of all economic transactions, assets and obligations, retention of documents and reporting procedures as well as other aspects related to accounting.
Each year, you will have to prepare and submit to the Commercial Register an annual report which gives a comprehensive overview of the company’s results in the previous financial year.
In addition to the above, you will also have to file other reports and declarations, depending on your form of business, structure and area of activity.
Cash and accrual methods of accounting
Accounting for Estonian companies is based on the accrual method, but sole proprietors (FIEs) may use the cash method of accounting. In the case of accrual method, economic transactions will have to be recognized as they accrue, regardless of whether funds have been received or paid. In the cash method of accounting, economic transactions are recognized based on the receipt or payment of the funds related to the transaction.