Bookkeeping is the recording of the money values of the operation of a business. Bookkeeping creates the figures from which accounts are made but is a previous process, prior to accounting.

Fundamentally, bookkeeping records two kinds of information: (1) the current value, or equity, of an enterprise and (2) any changes in value—profit or loss—taking place in the enterprise within a given period of time.

Management officials, investors, and credit grantors all have to have this information: management so as to assess the upshots of operations, to control costs, to budget for the future, and to make financial policy decisions; investors to analyse the outcome of business operations and make decisions for buying, holding, and selling securities; and credit grantors to assess the financial statements of an enterprise in assessing whether to grant a loan.

Traces of financial and numerical records can be seen for just about every group of people with a commercial history. Records of commercial contracts have been found in the ruins of Babylon, and accounts for both farms and estates were created in ancient Greece and Rome. The double-entry method of bookkeeping came with the furthering of the enterprising republics of Italy, and manuals for bookkeeping were developed during the 15th century in several Italian cities.

In 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 factual financial records a requirement. The past of bookkeeping, in fact, resembles the ancestry of commerce, industry, and government and, in some part, helped to form it. The global expansion of industrial and commercial activity demanded better cosmopolitan decision-making methods, which in its turn demanded greater sophistication in the selection, classification, and presentation of information, increasingly with the progression of computers. Taxation and government regulation became more significant and resulted in higher need for information; entities had to have available information to bolster their income tax, payroll tax, sales tax, and other tax reports. Governmental agencies and educational and other nonprofit institutions also grew, and the need for bookkeeping for their inner departmental operations became higher.

Although bookkeeping methodology can be rather multifaceted, it is all based on two styles of books utilised in the bookkeeping process—journals and ledgers. A journal should have the daily transactions (sales, purchases, etcetera), and the ledger has the record of individual accounts. The daily records kept in the journals are written in the ledgers.

Each month, generally speaking, an income statement and a balance sheet are made from the trial balance posted from the ledger. The duty of the income statement or profit-and-loss statement is to provide an analysis of any changes that took place in the enterprise equity because of the operations of the period. The balance sheet shows the financial condition of the enterprise at any particular day with regard to assets, liabilities, and the ownership equity.

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