Bookkeeping is the recordkeeping of the money values of the transactions of a business. Bookkeeping provides the details from which accounts are drafted but is a different process, prior to accounting.

Predominantly, bookkeeping grants two kinds of information: (1) the current value, or equity, of the business and (2) the changes in value—profit or loss—taking position in the enterprise during a single time.

Management officials, investors, and credit grantors all need to have this kind of information: management in order to assess the outcomes 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 for buying, holding, and selling securities; and credit grantors so as to judge the financial statements of a business in judging whether to accept a loan.

Traces of financial and numerical charts can be uncovered for just about every group of people with a commercial background. Records of trading contracts were found in the ruins of Babylon, and accounts for both farms and estates were kept in ancient Greece and Rome. The dual-entry manner of bookkeeping began with the progression of the entrepeneurial republics of Italy, and instruction books for bookkeeping were developed within the 15th century in several Italian cities.

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

The rise of manufacturing, trading, shipping, and subsidiary services made correct financial bookkeeping a paramount factor. The history of bookkeeping, in fact, resembles the ancestry of commerce, industry, and government and, in some part, assisted to shape it. The worldwide expansion of industrial and commercial activity required greater cosmopolitan decision-making methods, which then demanded more sophistication in the selection, classification, and presentation of information, increasingly with the assistance of computers. Taxation and government legislature became more detailed and resulted in even greater demand for information; entities had to show information to list with their income tax, payroll tax, sales tax, and other tax reports. Governmental agencies and educational and other nonprofit institutions also become larger, and the need for bookkeeping for their own inner operations increased.

While bookkeeping processes can be rather multifaceted, 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, and so on), and the ledger has the details of individual accounts. The daily records from the journals are put in the ledgers.

At the end of each month, generally, an income statement and a balance sheet are constructed from the trial balance posted from the ledger. The purpose of the income statement or profit-and-loss statement is to provide an analysis of the changes that occurred in the entity equity due to the transactions of the period. The balance sheet provides the financial position of the entity at any particular point regarding assets, liabilities, and the ownership equity.

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