Ninja Pirate Books

Bookkeeping is the charting of the money values of the operation of a business. Bookkeeping grants the details from which accounts are drafted but is a separate process, required prior to accounting.

Basically, bookkeeping finds two kinds of information: (1) the current value, or equity, of the enterprise and (2) any changes in value—profit or loss—taking placement in the enterprise within a particular period of time.

Management officials, investors, and credit grantors all need 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 to assess the upshot of business operations and make decisions about buying, holding, and selling securities; and credit grantors so as to assess the financial statements of an enterprise in deciding whether to give a loan.

Traces of financial and numerical record charts have been found for just about every country with a commercial background. Records of trade contracts have been discovered in the remains of Babylon, and accounts for both farms and estates were created in ancient Greece and Rome. The dual-entry process of bookkeeping came with the furthering of the entrepeneurial republics of Italy, and instruction manuals for bookkeeping were developed in the 15th century in some Italian cities.

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

The rise of manufacturing, trading, shipping, and subsidiary services made correct financial books a must-have. The ancestry of bookkeeping, in fact, closely resembles the ancestry of commerce, industry, and government and, partially, helped in shaping it. The international market of industrial and commercial activity called for higher sophisticated decision-making processes, which in turn demanded greater sophistication in the selection, classification, and presentation of information, more so with the assistance of computers. Taxation and government regulation became more detailed and resulted in even greater need for information; entities had to have information available to list with their income tax, payroll tax, sales tax, and other tax reports. Governmental agencies and educational and other nonprofit institutions also developed in size, and the demand for bookkeeping for their inner departmental operations went up.

Though bookkeeping methods can be very multifaceted, it is all based on two types of books employed in the bookkeeping procedure—journals and ledgers. A journal contains the daily transactions (sales, purchases, and such), and the ledger should have the details of individual accounts. The daily records from the journals are entered in the ledgers.

Each month, generally, an income statement and a balance sheet are prepared from the trial balance posted within the ledger. The duty of the income statement or profit-and-loss statement is to give an analysis of those changes that took place in the enterprise equity from the events of the period. The balance sheet displays the financial situation of the corporation at a particular point in time derived from assets, liabilities, and the ownership equity.

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