Cash Flow Categories (IAS 7)

Admin 6 min read Updated July 2026

The Cash Flow Category on a GL account is what lets REDA Financials AI produce your Cash Flow Statement automatically — the third primary financial statement under IAS 7, alongside the Balance Sheet and the Income Statement. You tag each account once with how its movements behave in cash-flow terms, and REDA assembles a compliant indirect-method cash flow statement from there.

This article explains exactly what each category means, where it lands on the statement, and how to classify your accounts — so the Cash Flow Statement comes out right the first time.

Getting there. The Cash Flow Category lives on each GL account. Open the App Launcher (the grid icon at the top-left of any page) → REDA Financials Admin → the GL Accounts tab, then open an account to set or change its category.
Access you'll need. Classifying accounts requires the Accounting Admin v2 or Accounting Controller v2 permission set. The Accounts Payable v2, Accounts Receivable v2, and Read Only v2 sets can view accounts but not change them.

This is a reporting field — it never affects posting The Cash Flow Category classifies an account for the Cash Flow Statement and nothing else. It isn’t copied onto transactions, it’s not checked by the posting engine, and there are no validation rules tied to it. Changing it re-shapes how the account appears on the cash flow statement the next time you run it — it can never affect a posting, a balance, or any other report.

The three activities of IAS 7

IAS 7 splits cash movements into three activities. Every category in REDA maps to one of them (or is deliberately excluded):

Operating — cash generated by the core business: trading, working capital, and the non-cash items added back to profit.
Investing — buying and selling long-term assets (property, plant, equipment, investments).
Financing — raising and repaying capital: borrowings, share issues, dividends.

The eight categories

REDA ships eight cash-flow categories. Here is what each one means, the line of the statement it feeds, and the kind of account that belongs in it:

Category	Statement line	Use it for
Operating – Non-Cash Adjustment	Operating → Adjustments for Non-Cash Items	Non-cash expenses added back to profit — depreciation, amortisation, impairment, provisions.
Operating – Inflow	Operating → Changes in Working Capital (Inflows)	Working-capital sources — e.g. a rise in payables or accruals, a fall in receivables or inventory.
Operating – Outflow	Operating → Changes in Working Capital (Outflows)	Working-capital uses — e.g. a rise in receivables or inventory, a fall in payables.
Investing – Inflow	Investing → Investing Inflows	Cash in from disposing of long-term assets — proceeds from selling PP&E or investments.
Investing – Outflow	Investing → Investing Outflows	Cash out to acquire long-term assets — purchases of PP&E or investments.
Financing – Inflow	Financing → Financing Inflows	Cash raised — new borrowings, share issues, capital contributions.
Financing – Outflow	Financing → Financing Outflows	Cash returned — loan repayments, dividends paid, share buybacks.
Excluded	Not a statement line	The cash and bank accounts themselves (they are the cash being reconciled), and intercompany balances. See below.

Why “Excluded” exists A cash flow statement explains the change in cash itself, so the cash and bank accounts can’t also appear as a line within it — that would double-count. Tagging them Excluded keeps them out of the activity sections and reserved for the closing Cash and Cash Equivalents reconciliation. Intercompany balances are excluded for the same “not a third-party cash flow” reason.

How the statement is built (indirect method)

REDA uses the indirect method — the presentation most organisations file. It starts from profit and adjusts back to cash, in this order:

Section	What goes in & how it’s measured
Operating	Begins with Net Profit / (Loss) for the period (from the Income Statement), then adds back non-cash items (the Non-Cash Adjustment accounts, measured as the period’s activity) and applies changes in working capital (the operating Inflow/Outflow accounts, measured as the change in balance over the period).
Investing	The period’s activity on Investing accounts — inflows (disposals) less outflows (purchases).
Financing	The period’s activity on Financing accounts — inflows (capital raised) less outflows (repaid).
Cash & Cash Equivalents	The three sections sum to the net change in cash, which reconciles your opening to closing cash balance — the proof the statement is complete.

The two ways amounts are measured It’s worth knowing the distinction: non-cash, investing and financing lines use the period’s activity (what flowed during the period), while working-capital lines use the change in balance (closing minus opening). That’s standard indirect-method behaviour — REDA handles the signs for you, so an asset that grows shows as an outflow and a liability that grows shows as an inflow, automatically.

Classifying your accounts

Your seeded chart already carries sensible cash-flow categories, so most clients have little to do. When you add accounts of your own, this is the quick guide:

Account kind	Typical category
Cash, bank, petty cash	Excluded
Receivables, payables, inventory, accruals, prepayments	Operating Inflow / Outflow
Depreciation, amortisation, impairment, provisions	Operating Non-Cash Adjustment
Property, plant & equipment, investments	Investing Inflow / Outflow
Loans, borrowings, share capital, dividends	Financing Inflow / Outflow
Intercompany receivable / payable	Excluded
Revenue & expense (P&L) accounts	Leave blank — profit is already the operating starting point

Two paths to the Cash Flow Statement If you’ve built a reporting framework with Cash Flow groups, REDA uses that structure. Otherwise it builds the statement automatically from each account’s Cash Flow Category — the path described here. Either way, the category on the account is what tells REDA how the money moves.

A note on custom categories

The Cash Flow Category field is open — you can add your own values. But unlike the account Sub-Types, the Cash Flow Statement is assembled from the eight standard categories above, each mapped to a specific line. A category you invent won’t be recognised by the statement and the accounts tagged with it won’t appear in it.

Use the standard eight for the Cash Flow Statement To keep your IAS 7 statement complete and accurate, classify accounts using the eight shipped categories. If you have a genuine need for a different cash-flow presentation, model it through a reporting framework rather than a custom category — that way the structure is one the statement generator understands.

Where to go next

Understanding GL Accounts — where the category is set.
GL Account Types & Sub-Types — how accounts are classified.
Chart of Accounts Setup Best Practices — tag categories consistently.
Cash Flow Statement — the report these categories build.
Standard Reports — the full report library.

Frequently asked questions

No. Set it on Balance Sheet accounts that move cash (assets, liabilities, equity) and on non-cash expense accounts. Leave it blank on ordinary revenue and expense accounts — the statement already starts from net profit, so tagging P&L accounts would double-count. Cash and bank accounts should be Excluded.

Almost always a classification gap: a Balance Sheet account that moved during the period has no Cash Flow Category, so its change isn’t reflected. Review your asset, liability, and equity accounts and make sure each carries the right category. The closing Cash and Cash Equivalents reconciliation is your check — when every moving account is classified, it ties out.

It affects only the Cash Flow Statement, and only the next time you run it — the statement is computed live from current classifications. It never touches a posting, a balance, or another report, because the field exists purely for cash-flow reporting.

Because under the indirect method the statement starts from net profit, which already has depreciation deducted — yet no cash actually left the business for it. Tagging depreciation as Operating – Non-Cash Adjustment adds it back, correcting profit toward the real cash figure. The actual cash went out earlier, when the asset was bought (an investing outflow).

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