What Is Accounting?

Accounting is a systematic process of recording, classifying, and presenting all information about a company's financial activities. It is a legal obligation for all businesses operating in Estonia and forms the basis for correct tax reporting and management decision-making. The core elements of accounting include income and expense records, the balance sheet, the profit and loss statement, and the cash flow statement. The balance sheet provides an overview of a company's assets, liabilities, and equity at a specific date. The profit and loss statement shows the company's financial performance over a given period, indicating whether it is profitable or in loss. In Estonia, accounting must comply with the Accounting Act and either the Estonian Financial Reporting Standard (EFS) or International Financial Reporting Standards (IFRS). All transactions must be documented with source documents — invoices, contracts, receipts — and retained for at least seven years. Professional accounting helps a company fulfil all statutory obligations on time, avoid fines and sanctions, and gain a clear financial picture that is essential for both day-to-day management and strategic planning.