Estonian income statement: scheme 1 vs scheme 2 — which to choose

27 June 20265 min readincome statementscheme 1scheme 2

Estonia offers two income statement formats (RPS paragrahv 18). Scheme 1 groups costs by type (goods, labour, depreciation); scheme 2 groups them by function (cost of sales, distribution, administration). For a one-owner service company, scheme 1 is usually the right choice — simpler and more common.

Part of the guide: Filing the Estonian annual report

What is the difference between scheme 1 and scheme 2?

Both reach the same result — the profit for the year. The difference is how costs are grouped (RPS paragrahv 18, Annex 2). For a filled-in scheme 1 income statement, see the annual report example.

Scheme 1 — costs by type

Scheme 1 groups costs by what kind they are:

revenue,
other operating income,
goods, raw materials, and services,
miscellaneous operating expenses,
labour costs,
depreciation,
other operating expenses.

It is intuitive: you look at what the money was spent on and put it in the matching line. A service company has most of its costs in "miscellaneous operating expenses" and "labour costs".

Scheme 2 — costs by function

Scheme 2 groups costs by what purpose they served:

revenue,
cost of goods/services sold,
distribution costs,
administrative expenses.

This requires splitting each cost across functions — part of the rent to sales, part to administration, for example. For a manufacturing or trading company it gives a clearer view of margin, but it takes more work.

Which suits a micro-enterprise?

Usually scheme 1. For a one-owner service company with no production or inventory, splitting costs by function is artificial work with no payoff. Scheme 1 takes less work, is more common, and is entirely sufficient.

Consider scheme 2 if you have a clear production or trading chain and want to see cost of goods sold separately.

Can you switch later?

You choose the scheme when creating the report on the portal. For consistency, stick with the same scheme year to year — it keeps reports comparable (RPS paragrahv 22 requires prior-year comparatives).

References

Raamatupidamise seadus (RPS / Accounting Act) — paragrahv 18 and Annex 2 (income statement schemes), paragrahv 22 (comparative data).

nosweat.finance uses scheme 1 (the best fit for a one-owner service company) and fills the lines from your transactions. You review and submit it yourself.