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Bookkeeping is the recordkeeping of the money values of the operation of a business. Bookkeeping creates the details from which accounts are made but is a distinct process, prior to accounting.

Essentially, bookkeeping finds two types of information: (1) the current value, or equity, of an entity and (2) the change in value—profit or loss—taking place in the entity from a single time.

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

Bits and pieces of financial and numerical recordkeeping can be uncovered for nearly every country with a commercial backbone. Records of business contracts were found in the archaelogy of Babylon, and accounts for both farms and estates had been made in ancient Greece and Rome. The dual-entry way of bookkeeping started with the development of the commercial republics of Italy, and tutorial manuals for bookkeeping were produced during the 15th century in many Italian cities.

During the late 18th and early 19th centuries, the Industrial Revolution provided an important stimulus to accounting and bookkeeping.

The rise of manufacturing, trading, shipping, and subsidiary services made factual financial records a must-have. The history of bookkeeping, in fact, reflects closely the ancestry of commerce, industry, and government and, in part, helped shaping it. The global expansion of industrial and commercial activity required greater professional decision-making methods, which itself needed greater sophistication in the selection, classification, and presentation of information, increasingly with the progression of computers. Taxation and government legislature became more important and resulted in increased need for information; enterprising 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 become larger, and the need for bookkeeping for their own inner departmental operations went up.

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

At the end of each month, generally, an income statement and a balance sheet are made from the trial balance posted from the ledger. The point of the income statement or profit-and-loss statement is to display an analysis of any changes that have taken place in the ownership equity from the operations of the period. The balance sheet provides the financial position of the enterprise at a particular point in time derived from assets, liabilities, and the ownership equity.

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