Bookkeeping is the recordkeeping of the money values of the function of a business. Bookkeeping grants the numbers from which accounts are drafted but is a different process, prior to accounting.

Fundamentally, bookkeeping finds two parts of information: (1) the current value, or equity, of the enterprise and (2) any changes in value—profit or loss—taking place in the entity from a singular time.

Management officials, investors, and credit grantors all require such information: management to interpret the results of operations, to control costs, to budget for the future, and to make financial policy decisions; investors to understand the upshots of business operations and make decisions regarding buying, holding, and selling securities; and credit grantors in order to regard the financial statements of an entity in judging whether to accept a loan.

Bits and pieces of financial and numerical record charts have been found for nearly every group of people with a commercial history. Records of trade contracts were discovered in the archaelogical digs of Babylon, and accounts for both farms and estates were created in ancient Greece and Rome. The two-entry style of bookkeeping came up with the development of the commercial republics of Italy, and instruction manuals for bookkeeping were developed during the 15th century in various Italian cities.

Within the late 18th and early 19th centuries, the Industrial Revolution permitted a notable stimulus to accounting and bookkeeping.

The development of manufacturing, trading, shipping, and subsidiary services made perfect financial recordkeeping a necessity. The history of bookkeeping, in fact, closely resembles the history of commerce, industry, and government and, partially, assisted to shape it. The global expansion of industrial and commercial activity demanded higher sophisticated decision-making methods, which itself needed more sophistication in the selection, classification, and presentation of information, more so with the assistance of computers. Taxation and government regulation became more detailed and resulted in greater need for information; business firms had to provide information to list with their income tax, payroll tax, sales tax, and other tax reports. Governmental agencies and educational and other nonprofit institutions also became sizeable, and the requirement for bookkeeping for their own operations increased.

While bookkeeping methods can be rather detailed, it is all based on two styles of books used in the bookkeeping procedure—journals and ledgers. A journal contains the daily transactions (sales, purchases, etcetera), and the ledger must have the information of individual accounts. The daily records from the journals are entered in the ledgers.

At the end of each month, generally speaking, an income statement and a balance sheet are created from the trial balance posted from the ledger. The purpose of the income statement or profit-and-loss statement is to give an analysis of any changes that happen in the entity equity due to the events of the period. The balance sheet displays the financial situation of the enterprise at the particular point in time regarding assets, liabilities, and the ownership equity.

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