Bookkeeping is the recording of the money values of the transactions of a business. Bookkeeping grants the information from which accounts are made but is a different process, prerequisite to accounting.

Basically, bookkeeping records two types of information: (1) the current value, or equity, of an entity and (2) any changes in value—profit or loss—taking place in the business within a singular time.

Management officials, investors, and credit grantors all need this information: management so as to analyse the outcomes of operations, to control costs, to budget for the future, and to make financial policy decisions; investors in order to interpret the upshot of business operations and make decisions for buying, holding, and selling securities; and credit grantors to judge the financial statements of a business in assessing whether to allow a loan.

Bits and pieces of financial and numerical records have been uncovered for nearly every state with a commercial history. Records of trade contracts were uncovered in the ruins of Babylon, and accounts for both farms and estates have been held in ancient Greece and Rome. The double-entry manner of bookkeeping started with the furthering of the business republics of Italy, and tutorial manuals for bookkeeping were created 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 development of manufacturing, trading, shipping, and subsidiary services made correct financial records a must-have. The past of bookkeeping, in fact, resembles the ancestry of commerce, industry, and government and, partially, assisted to shape it. The international spread of industrial and commercial activity required better sophisticate decision-making procedures, which itself needed higher sophistication in the selection, classification, and presentation of information, more so with the progression of computers. Taxation and government legislation became more important and resulted in even greater need for information; firms had to show 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 own departmental operations became larger.

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

Each month, by general practice, an income statement and a balance sheet are made from the trial balance posted out of the ledger. The job of the income statement or profit-and-loss statement is to give an analysis of the changes that occurred in the ownership equity resulting due to the operations of the period. The balance sheet shows the financial position of the business at a particular day derived from assets, liabilities, and the ownership equity.

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