# Cash Flow Statement

> How the Cash Flow Statement maps every account type to Operating, Investing, and Financing activities — and how the indirect-method reconciliation ties out to your bank balances.

Source: https://www.accountfun.com/docs/guides/cash-flow/

The **Cash Flow Statement** shows how cash moved in and out of your business over a period, organized into three activities: **Operating**, **Investing**, and **Financing**. It’s the report that answers “where did my cash go?” when profit and bank balance don’t match.

Open **Reports → Cash Flow Statement** and pick a date range (and, for multi-currency orgs, a display currency).

Reconciled data only

Like every report, the Cash Flow Statement draws from posted journal entries. Keep your bank accounts [reconciled](https://www.accountfun.com/docs/guides/bank-reconciliation/) so the cash reconciliation at the bottom ties out — unreconciled statement lines won’t appear until you clear them.

## The indirect method

AccountFUN builds the statement using the **indirect method**, the standard approach under both IFRS and US GAAP. You start with **net profit** (which is an accrual number, not a cash number) and then adjust it back toward cash by removing non-cash items and layering in the actual movements of your balance-sheet accounts.

Three groups of adjustments convert accrual profit into cash flow:

1. **Non-cash items** added back (depreciation, amortization, unrealized FX).
2. **Working-capital movements** — increases or decreases in current assets and current liabilities.
3. **Investing and financing** movements — non-current assets, non-current liabilities, and equity.

## Where each account type lands

This is the key question: *which of my accounts show up in which section?* The answer is driven by an account’s **type** (the same classification that drives your [Balance Sheet](https://www.accountfun.com/docs/guides/reports/) and [Chart of Accounts](https://www.accountfun.com/docs/guides/chart-of-accounts/)), split by whether the account is **current** (tied to day-to-day operations) or **non-current** (long-term).

### Operating activities

Operating covers the cash effects of day-to-day business — collecting from customers, paying suppliers, running the business. It starts from **net profit** and adjusts for working capital.

**Income statement (rolled into the Net Profit starting line)**

Revenue and expense accounts don’t appear individually. Instead they’re aggregated into the single **Net Profit** figure at the top:

| Account type                    | Examples                                       |
| ------------------------------- | ---------------------------------------------- |
| Revenue, Sales, Other Income    | Sales revenue, service income, interest earned |
| Expense, Direct Costs, Overhead | Rent, advertising, cost of goods sold          |

**Non-cash add-backs (no cash left the business)**

| Account type  | Why it’s added back                                                                                                                                                    |
| ------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| Depreciation  | Depreciation & amortization charges reduce profit but don’t use cash — they’re added back. (Both depreciation and amortization expense share the *Depreciation* type.) |
| Unrealized FX | Period-end currency revaluation gains/losses are reversed out, since they’re mark-to-market, not cash.                                                                 |

**Working capital — current assets**

Cash changes from short-term assets tied to operations. An *increase* in one of these consumes cash (e.g. inventory grew because you spent cash buying stock).

| Account type  | Examples                                                                            |
| ------------- | ----------------------------------------------------------------------------------- |
| Current Asset | Accounts Receivable (cash not yet collected from customers), short-term receivables |
| Inventory     | Cash tied up in stock on hand                                                       |
| Prepayment    | Cash paid early for services or goods                                               |

**Working capital — current liabilities**

Cash changes from short-term obligations. An *increase* here preserves cash (e.g. you owe a supplier more, so you haven’t paid them yet).

| Account type      | Examples                                                                       |
| ----------------- | ------------------------------------------------------------------------------ |
| Current Liability | Accounts Payable, accrued expenses, wages payable, tax payable                 |
| Liability         | General (current) liabilities — a plain *Liability* type is treated as current |

### Investing activities

Investing covers cash spent on or received from **non-current (long-term) assets** — the big purchases that grow the business over time.

| Account type      | Examples                                                            |
| ----------------- | ------------------------------------------------------------------- |
| Fixed Asset       | Property, plant & equipment (machinery, vehicles, office equipment) |
| Intangible Asset  | Patents, trademarks, software licenses acquired                     |
| Non-current Asset | Other long-term assets                                              |

Accumulated depreciation is not double-counted

The accumulated depreciation/amortization contra-asset accounts are excluded from Investing — their effect is already captured as the depreciation add-back in Operating, so it isn’t counted twice.

### Financing activities

Financing covers how the business is funded — borrowing, repaying debt, and transactions with owners.

**Non-current (long-term) liabilities**

| Account type          | Examples                                               |
| --------------------- | ------------------------------------------------------ |
| Non-current Liability | Long-term portion of loans, bonds, lease liabilities   |
| Long-term Liability   | Bank loans, mortgages, notes payable due beyond a year |

**Equity**

| Account type | Examples                                        |
| ------------ | ----------------------------------------------- |
| Equity       | Share capital, owner’s capital, paid-in capital |

Retained Earnings is split

Retained Earnings is handled specially. The profit portion flows through Operating as Net Profit, so it’s **not** double-counted in Financing. But if Retained Earnings drops because you paid out **dividends**, that distribution shows up as a separate **Dividends Paid** outflow under Financing.

## The full mapping at a glance

| Account type                                     | Section       | Why                                                |
| ------------------------------------------------ | ------------- | -------------------------------------------------- |
| Bank                                             | *(cash pool)* | Reconciled at the bottom, not shown as an activity |
| Current Asset, Inventory, Prepayment             | Operating     | Working capital                                    |
| Fixed Asset, Intangible Asset, Non-current Asset | Investing     | Long-term assets                                   |
| Current Liability, Liability                     | Operating     | Working capital                                    |
| Non-current Liability, Long-term Liability       | Financing     | Long-term funding                                  |
| Equity                                           | Financing     | Owner transactions                                 |
| Revenue, Sales, Other Income                     | Operating     | Via Net Profit                                     |
| Expense, Direct Costs, Overhead                  | Operating     | Via Net Profit                                     |
| Depreciation                                     | Operating     | Non-cash add-back                                  |

## The cash reconciliation

At the bottom of the statement, AccountFUN ties the three activities back to your actual cash. **Cash and cash equivalents are your Bank accounts** — the same balances shown on the dashboard.

The report checks that:

> **Net cash flow** (Operating + Investing + Financing) = **change in bank balances** over the period

When this holds, the statement **reconciles**. If it doesn’t, a warning appears noting that a non-cash item may be misclassified. This can happen for benign reasons — some balance-sheet movements the indirect method models imperfectly — but it’s worth investigating.

## Reading the report

* **Net Profit** leads Operating. A profitable business can still burn cash if working capital swells (e.g. customers paying slowly, inventory piling up).
* **Only accounts that moved** during the period appear. An account with zero net change is skipped, so the statement stays focused.
* **Inactive accounts** never contribute.
* Every amount is a link — click to drill into the [Transactions Report](https://www.accountfun.com/docs/guides/reports/) scoped to that account and period.

## Tips

* **Positive Operating cash flow is the health signal.** It means the core business generates cash. Consistently negative Operating cash funded by Financing is a warning sign.
* **Compare periods** by running the report across different date ranges — growing Investing outflows often mean you’re expanding capacity.
* For multi-currency orgs, a non-base **display currency** converts figures at the period rate (an amber banner notes the rate and date used).
* The Cash Flow Statement pairs with the [Unrealized FX report](https://www.accountfun.com/docs/guides/reports/) at period close to understand your true FX exposure.