Written by Bookkeeping is the recording of the money values of the operation of a business. Bookkeeping grants the figures from which accounts are made but is a separate process, preliminary to accounting.
Basically, bookkeeping grants two parts of information: (1) the current value, or equity, of an entity and (2) the changes in value-profit or loss-taking place in the business over a particular time.
Management officials, investors, and credit grantors all require this kind of information: management so as to understand the upshots of operations, to control costs, to budget for the future, and to make financial policy decisions; investors to interpret the upshot 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 deciding whether to accept a loan.
Bits and pieces of financial and numerical record charts have been seen for almost every nation with a commercial backbone. Records of trading contracts have been discovered in the archaelogy of Babylon, and accounts for both farms and estates have been held in ancient Greece and Rome. The dual-entry process of bookkeeping started with the development of the enterprising republics of Italy, and instruction books for bookkeeping were created within the 15th century in several Italian cities.
Within the late 18th and early 19th centuries, the Industrial Revolution gave a significant stimulus to accounting and bookkeeping.
The development of manufacturing, trading, shipping, and subsidiary services made perfect financial bookkeeping a paramount factor. The past of bookkeeping, in fact, reflects closely the past of commerce, industry, and government and, in some part, helped to form it. The worldwide expansion of industrial and commercial activity demanded more sophisticate decision-making methods, which then demanded better sophistication in the selection, classification, and presentation of information, increasingly with the aid of computers. Taxation and government legislation became more detailed and resulted in even greater requirement 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 grew in size, and the need for bookkeeping for their own inner operations increased.
Though bookkeeping methods can be very detailed, all are based on two styles of books used in the bookkeeping procedure-journals and ledgers. A journal should have the daily transactions (sales, purchases, and such), and the ledger has the information of individual accounts. The daily records kept in the journals are entered in the ledgers.
Every month, generally, an income statement and a balance sheet are prepared from the trial balance posted in the ledger. The point of the income statement or profit-and-loss statement is to give an analysis of the changes that occurred in the entity equity resulting due to the operations of the period. The balance sheet provides the financial condition of the corporation at the particular date derived from assets, liabilities, and the ownership equity.
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