Bookkeeping is the process of identifying and recording transactions and other financial events affecting an enterprise in a systematic way. It is the recording of financial transactions. The purpose is to create a record of financial transactions that can be summarized for various uses.
"IF YOU DON'T DRIVE YOUR BUSINESS, YOU WILL BE DRIVEN OUT OF BUSINESS". - B.C. Forbes
Bookkeeping is the categorizing and recording of financial data. Each transaction or activity must be posted to the proper general ledger(GL)account. The general ledge is used to prepare Profit & Loss Statements which tell you if you are making or losing money in a certain accounting period. The general ledger also produces Balance Sheets which show the company's assets, liabilities and equity. The GL also produces Cash Flow Statements which is analyzed by management and used as a gauge in making important decisions. These three financial reports are supposed to show the true financial condition of the company. Extremely important decisions are made by management from these financial statements and they must be accurate.
The bookkeeping process allows all data to be transferred to complicated financial statements for informational purposes. The integrity and accuracy of bookkeeping procedures affect the outcome of the financial statements. Bookkeeping is the crucial reporting that major decisions are later made from. It must be done correctly.