Estonian accounting terms every e-Resident founder should know (and what they mean)

Running an Estonian company as an e-resident means dealing with accounting terms that often look familiar but work a little differently in practice. Words like “revenue”, “profit”, or “annual report” exist everywhere, yet in Estonia they follow specific rules, formats, and legal meanings.

This guide explains the most important Estonian accounting terms every e-resident founder should understand, using plain language and real examples. You do not need an accounting background to read this. You just need to know what these terms mean when they appear in your reports, emails from accountants, or notices from the Business Register.

What is an annual report or annual account in Estonia (Majandusaasta aruanne)

Every Estonian company must submit an annual report for each financial year, regardless of whether the company had activity or not. This applies equally to local founders and e-residents.

The annual report is a structured financial summary submitted to the Estonian Business Register. It typically includes a balance sheet, a profit and loss statement, and mandatory notes. Even companies with no transactions must file a report confirming dormancy.

Why e-residents should know about annual report:
Missing the annual report deadline can lead to fines and, eventually, forced deletion of the company. Many problems arise not from complexity, but from misunderstanding what must be filed and when.

Profit and Loss statement (Kasumiaruanne)

The profit and loss statement, often called the P&L, shows how your company performed during the financial year. It lists income, expenses, and the resulting profit or loss.

In Estonia, the P&L follows a standard format defined by accounting regulations. This means categories and structure are not flexible. Even small companies must follow the prescribed layout.

Example:
If your company earned 20,000 EUR in sales and spent 15,000 EUR on expenses, the P&L shows a profit of 5,000 EUR for that year.

Common confusion:
Profit in the P&L does not mean money in your bank account. It is an accounting result, not cash.

If you prefer not to deal with accounting terminology and reporting rules yourself, Unicount prepares annual reports for Estonian companies, including e-resident-owned OÜs.

Balance sheet (Bilanss)

The balance sheet shows the company’s financial position at a specific moment, usually the last day of the financial year. It lists assets, liabilities, and equity.

Assets include bank balances, receivables, and fixed assets. Liabilities include unpaid invoices, loans, and taxes owed. Equity reflects the company’s accumulated results over time.

Why e-residents struggle with this:
Founders often assume that no sales means no balance sheet. In reality, even a single bank balance or unpaid cost must be reflected correctly.

Revenue vs Net income in Estonia

Revenue is the total amount earned from selling goods or services. Net income is what remains after all expenses, taxes, and costs are deducted.

In Estonian accounting, revenue recognition follows strict rules. Income is recorded when it is earned, not necessarily when the money arrives in the bank.

Example:
If you issue an invoice in December but receive payment in January, the revenue may still belong to the previous financial year.

Retained earnings (Jaotamata kasum)

Retained earnings represent accumulated profits that have not been distributed as dividends. This amount carries over from year to year and appears in the equity section of the balance sheet.

For e-resident founders, retained earnings often grow quietly until dividends are considered. However, dividends cannot be paid unless the annual report has been submitted and approved.

Key point:
Retained earnings are not automatically cash. They reflect accounting results, not available funds.

Dormant company in Estonia

A dormant company is a company that had no economic activity during the financial year. This means no sales, no expenses, and no transactions.

Dormancy is not optional or subjective. Even a single transaction, such as a bank fee or software subscription, can make the company active under Estonian rules.

Why this matters:
Dormant companies still must submit an annual report, but the structure is simplified. Misclassifying activity is one of the most common reasons reports get delayed or rejected.

Source documents (Algdokumendid)

Source documents are the original records behind every transaction. These include invoices, contracts, bank statements, and receipts.

In Estonia, bank statements alone are not sufficient. Each transaction must be supported by a valid source document explaining its purpose.

Typical e-resident mistake:
Providing only bank statements without invoices or explanations for payments.

Financial year (Majandusaasta)

Most Estonian companies use the calendar year as their financial year, ending on 31 December. However, some companies have a different financial year defined in their articles of association.

The annual report deadline is calculated based on the financial year end, not the calendar year.

Why understanding these terms saves time and money

Most accounting issues faced by e-resident founders are not caused by complicated rules. They come from misunderstandings of basic terms and expectations.

Knowing what accountants mean when they ask for documents, clarifications, or confirmations helps you respond faster and avoid unnecessary revisions. It also allows you to plan ahead instead of reacting under pressure.

How Unicount helps e-Residents navigate Estonian accounting

Unicount works with e-resident founders who manage their companies remotely and need accounting explained clearly, not translated word-for-word from legislation.

We prepare annual reports, review company activity correctly, and ensure reports are submitted in line with Estonian accounting requirements. Whether a company is dormant or active, the goal is the same: correct reporting without last-minute stress.

If you are unsure how these accounting terms apply to your company, Unicount can review your situation and guide you through the process.

Frequently Asked Questions About Estonian Accounting Terms

What accounting terms should every Estonian e-resident understand?

Every e-resident managing an Estonian company should understand what an annual report is, how a profit and loss statement differs from a balance sheet, what counts as revenue, and how retained earnings work. These terms appear in official filings, accountant communication, and the Business Register, and misunderstanding them often leads to delays or incorrect reporting.

What is the difference between a profit and loss statement and a balance sheet in Estonia?

The profit and loss statement shows how the company performed over a period of time, usually one financial year. It focuses on income and expenses. The balance sheet shows the company’s financial position at a specific date, including assets, liabilities, and equity. In Estonia, both follow standardised formats and are mandatory parts of the annual report.

Do dormant Estonian companies need to submit an annual report?

Yes. Even if an Estonian company had no activity during the financial year, an annual report must still be submitted. Dormant companies file a simplified report confirming inactivity, but the obligation itself does not disappear. Failing to submit a dormant annual report can still result in fines or removal from the register.

What bank statements are required for an Estonian annual report?

Estonian annual reports require bank statements covering the entire financial year for all company accounts. This applies even if there were no transactions. Incomplete or missing statements are one of the most common reasons annual report preparation is delayed.

How is revenue defined in Estonian accounting?

Revenue in Estonian accounting is recorded when income is earned, not when payment is received. This means invoices issued before year-end may count as revenue for that year even if the money arrives later. This distinction is important for correct profit calculation and reporting.

What are retained earnings in an Estonian company?

Retained earnings are profits that have not been distributed as dividends. They accumulate over time and appear in the equity section of the balance sheet. Retained earnings do not automatically represent available cash and cannot be distributed unless the annual report has been submitted and approved.

Who prepares the annual report for Estonian e-resident companies?

The annual report can be prepared by company management or by a professional accounting service. Most e-residents choose to outsource this work to Estonian accountants who are familiar with local reporting standards, language requirements, and Business Register submission procedures.