This Cashflow Statement help note is part of a series of articles on Financial Settings. 


The Cashflow Statement report is a standard financial statement. It shows how changes in Net Profit and Balance Sheet accounts affect cashflow, and is displayed by Operating, Investing and Financing activities. This report cannot be run straight out of the box - it requires some configuration before it can run efficiently. 


In this article, we'll look at how to allocate your accounts to the Operating, Investing, Financing and Non-Cash activities. We will also cover how to ensure Non-Cash accounts are balanced.


Step 1 - Nominate Accounts


Since the Cashflow Statement report allocates cashflows as either Operating, Investing or Financing and excludes Non-Cash accounts, you are required to categorise your chart of accounts accordingly.

  1. To navigate to the Cashflow Statement screen, first click on My Workspace -> Settings.

    Go to Settings

  2. Select your organisation from the Selected organisation drop-down if you have more than one organisation (otherwise go to step 3).

    Select Organisation

  3. Select Cashflow Statement from the menu at left.

    Click on the Cashflow Statement menu

  4. Calxa will categorise accounts according to the following logic, applied in this order:

    1. Non-Cash accounts = Accounts with a Cashflow Type of None – Superannuation Expense – Trade Debtors – Trade Creditors

    2. Investing accounts = Long-Term Assets = (KPI group [Total Assets]) – (KPI group [Current Assets])

    3. Financing accounts = Long-Term Liabilities + Equity = ((KPI group [Total Liabilities]) – (KPI group [Current Liabilities])) + Equity

      • Note: Bank & Trade Account Settings for Bank accounts, Current Year Earnings and Retained Earnings are all excluded from the Statement of Cashflows nominations.

        Account categorisation

  5. To edit the category nominations, select an account, then use the Move selected to drop-down to move the account to another category. You can also move accounts by drag and drop.

    Multiple accounts can be selected at the same time by holding the Ctrl key while selecting the accounts. Alternatively, a range of accounts can be selected by holding the Shift key and selecting the first and last account in the range.

    Edit category nominations
    Note: See the Activity Types section below for a description of what to include in the Operating, Investing and Financing activities.


  6. Click Save to save your changes when you have finished editing your account nominations.

    Save Changes


Step 2 – Ensure Non-Cash Accounts are Balanced


First up, let's explain the difference between Non-Cash Accounts for the Cashflow Statement and the Cashflow Type of None for the purpose of Cashflow Forecasting. These are nominated separately because they hold separate meanings, and in some cases accounts with a Cashflow Type of None should not be considered a Non-Cash Account for the Cashflow Statement.


For example, when you nominate Superannuation Expense and Superannuation Payable in the Superannuation Financial Settings screen, this sets the Cashflow Type to None on the expense and Schedule on the liability. The cashflow type of None in this case does not imply that Superannuation Expense is a Non-Cash activity, it simply indicates that the timing of the expense needs to be adjusted. 


For the Cashflow Statement, Superannuation is an expense derived from principal-revenue producing activities, so would be considered an Operating Account. As such, both the Superannuation Expense and Superannuation Payable should be nominated as Operating Accounts. The combined movement on these accounts will account for the cashflow from Operating Activities.


Now to understand why we need to balance the Non-Cash Accounts. Since this report identifies cashflows, Non-Cash accounts will be adjusted out of the report. For the accounting equation to hold true in this report, Debits must equal Credits. 


With all the accounts included in the report we know it balances, but if we start removing accounts we must make sure the accounts we remove have equal debits and credits. Put simply, if the sum of the Non-Cash accounts do not balance to zero the net cashflows will not balance with the opening and closing bank.


Balancing the Non-Cash Accounts is generally a case of ensuring each account has a matching pair. For example, Depreciation Expense should have a matching Accumulated Depreciation account nominated. Please carefully review your Non-Cash activities to ensure each account has a matching account to keep the group balanced.

 


Run the Cashflow Statement (Indirect) Report


Please see the Cashflow Statement (Indirect) Report help note for instructions on how to create an account tree to help you summarise the Cashflow Statement and display the report.


Activity Types - Cashflow Statement Report


Operating Activities

Operating Activities are the principal revenue producing activities of the organisation. Since most Profit and Loss accounts are categorised as Operating Activities, it is common for this category to be calculated starting with Net Profit, then the Non-Operating Activities are adjusted out.

Non-Operating Activities include Non-Cash accounts like depreciation. There will also be adjustments for Balance Sheet movements such as Current Assets and Current Liabilities like Debtors and Creditors. This is referred to as the Indirect Method, and is the method used by Calxa to calculate this report.


Investing Activities

Investing Activities represent the acquisition and disposal of long-term assets or other long term investments. Purchasing or selling property, plant and equipment or intangibles would be classified as Investing.


Financing Activities

Financing Activities represent transactions that result in changes in the size and contribution of capital and borrowings. Examples of Financing Activities include changes in equity related to shares, or changes in liabilities related to long term borrowings.




Want to learn more? Have a look at the other help notes in the Financial Settings series:


GST / VAT
Wages & PAYG

Bank & Trade Accounts

Superannuation (Pension Plan)

Depreciation

Inventory

Cashflow (Basic Settings)

Cashflow (Advanced Settings)