Key Accounting Terms

Accounting policies and procedures

Procedures for maintaining internal accounting should be developed at the beginning of the activity.

Internal accounting procedures should:

• Describe the required chart of accounts with a description of the content of these accounts.
• Regulate the procedure for documenting and recording transactions.
• Establish circulation and storage of primary documents.
• Regulate the maintenance of accounting registers.
• Reflect income and expenses in the profit and loss statement.
• Describe the inventory, assets, and liabilities of the company.
• Determine the accounting policy, reporting procedure and other accounting.

Internal accounting rules are binding and individual for every company.

Balance sheet

Every Estonian company must prepare a starting balance sheet that lists the company’s assets, liabilities, and share capital before starting an economic activity.

Financial year report

The financial year of the company is 12 months. In most cases, the fiscal year is a calendar year(from January 1 to December 31). Still, a company charter or other document that regulates its activities may also set a different fiscal year following the accounting entity’s operating cycle.

Company management report

The management report provides an overview of the company’s operations and the circumstances that have played a decisive role in assessing the financial situation and business activities, significant events in the financial year, and the expected development directions in the next financial year.

Annual report

The annual report is mandatory for every company registered and operating in Estonia and must comply with government regulations. The annual report consists of an annual accounting report and a report on the activities of the company.

Audit

An audit or review of the annual financial statement aims to increase the reliability of your company’s financial information in the eyes of investors, shareholders, and the public.

It is important to remember that a certified audit report does not relieve the Management Board from liability for the accounting report’s content.

VAT number

According to Estonian legislation, a company must register a VAT if its turnover threshold reaches 40,000 EUR. A company with a VAT registered must submit tax returns every month.

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