Cash Flow basics

The Cash Flow Statement reconciles your Net Profit (an accrual measure) to your actual change in cash position over the period. Ledgable uses the indirect method — the standard for AU SMB reporting per AASB 107.

Three sections

SectionWhat's in it ------ OperatingNet profit + non-cash adjustments (e.g. depreciation) + working-capital changes (AR, AP, prepaids). InvestingPurchases and disposals of long-lived assets (property, plant, equipment). FinancingNew loans, loan repayments, owner contributions, owner drawings.

The three subtotals sum to Net Change in Cash for the period. Net Change + Opening Cash = Closing Cash, which Ledgable reconciles against your actual bank account balance at period-end.

How to read working-capital changes

These are the most commonly-misread lines on the report.

Increase in Accounts Receivable → cash impact NEGATIVE. You sold more on credit; the cash hasn't arrived yet.

Decrease in Accounts Receivable → cash impact POSITIVE. You collected outstanding invoices.

Increase in Accounts Payable → cash impact POSITIVE. You owe more to suppliers; cash hasn't gone out yet.

Decrease in Accounts Payable → cash impact NEGATIVE. You paid down supplier balances.

Ledgable labels each line "Increase (decrease) in [account name]" so the sign convention is explicit.

Reconciliation

At the bottom of the report, the Reconciliation section compares:

closingCash — the value the indirect method computed (opening + net change)

actualCashBalance — the actual sum of your cash and bank account balances at period-end

drift — the absolute difference

reconciled = true when drift ≤ $0.01. If reconciled is false, possible causes:

A non-cash account is misclassified (e.g. an investment account showing under bank/cash code range)

An off-cycle journal entry posted directly to a bank account without going through the normal posting service

A working-capital account is missing the right account_class

Caveats and limitations

Depreciation. Currently the depreciation add-back line emits zero with a note. We're waiting on a depreciation posting convention (a dedicated accumulated_depreciation account class). Until then, businesses with depreciating fixed assets will see their indirect-method closing cash slightly off — the reconciliation drift will reveal the mismatch. Cash-in / cash-out columns. The Cash Flow Statement uses the indirect method, which produces a NET movement per section. The "cashIn" and "cashOut" columns shown in some UI views are derived from the sign of the net (positive → cashIn, negative → cashOut). They don't represent gross flows. For gross-flow reporting, run the Account Transactions report on each cash account. Classification heuristic. Accounts are classified into Operating / Investing / Financing using a code-range heuristic that matches the standard Ledgable chart of accounts. If your chart uses non-standard codes, you may see misclassifications — please report them via the Help → Support form.