Bookkeeping is the recording of the money values of the transactions of a business. Bookkeeping gives the information from which accounts are written but is a previous process, prerequisite to accounting.

Predominantly, bookkeeping provides two parts of information: (1) the current value, or equity, of an entity and (2) changes in value—profit or loss—taking placement in the enterprise from a given period of time.

Management officials, investors, and credit grantors all have to have such 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 so as to understand the outcomes of business operations and make decisions about buying, holding, and selling securities; and credit grantors so as to regard the financial statements of an entity in judging whether to give a loan.

Traces of financial and numerical recordkeeping are uncovered for almost every country with a commercial history. Records of trade contracts have been uncovered in the ruins of Babylon, and accounts for both farms and estates were archived in ancient Greece and Rome. The two-entry manner of bookkeeping came with the progression of the entrepeneurial republics of Italy, and instruction books for bookkeeping were created during the 15th century in some Italian cities.

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

The progression of manufacturing, trading, shipping, and subsidiary services made factual financial records a requirement. The ancestry of bookkeeping, in fact, reflects the past of commerce, industry, and government and, in some part, assisted forming it. The worldwide expansion of industrial and commercial activity required higher cosmopolitan decision-making methodology, which in its turn demanded better sophistication in the selection, classification, and presentation of information, increasingly with the aid of computers. Taxation and government legislature became more important and resulted in even greater need for information; business firms had to provide information to support their income tax, payroll tax, sales tax, and other tax reports. Governmental agencies and educational and other nonprofit institutions also grew in size, and the need for bookkeeping for their own inner operations became larger.

Though bookkeeping procedures can be very detailed, it is all based on two types of books used in the bookkeeping procedure—journals and ledgers. A journal has the daily transactions (sales, purchases, etcetera), and the ledger must have the record of individual accounts. The daily records from the journals are written in the ledgers.

Every month, by general practice, an income statement and a balance sheet are created from the trial balance posted from the ledger. The point of the income statement or profit-and-loss statement is to show an analysis of any changes that have taken place in the enterprise equity resulting from the events of the period. The balance sheet gives the financial condition of the company at a particular day derived from assets, liabilities, and the ownership equity.

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