My flag system is for credit card reconciliation, pre-YNAB4. I needed to solve the following problems:
1) I needed to record that the transaction had been registered at my credit card provider, to catch those pesky purchases that I 'forgot' to enter
2) I needed to know what my last statement's balance was
3) I need to know what my current statement's balance is
4) I download my credit card statement as a QFX to confirm everything at the end of each period
With all those things in mine, I discovered that whenever you download, your transactions are automatically 'Cleared'. This makes the cleared balance equivalent to your last statement balance, and the uncleared balance your current statement. Even better, the total of those (working balance) accurately represented my debt to the credit card company.
So I didn't want to mess with the cleared column, given how well it was achieving 3/4 goals.
So I went to the flag. I flag an item some color to show my credit card has cleared it. This allows me to determine what's uncleared, and what I failed to enter into YNAB. I use two colors (green and yellow) so that each time I check my statement, I don't reuse the previous color. This way, I don't wonder if I had already cleared it today, or several days ago.
I think this will still be necessary even in YNAB4, as the lock icon is valuable, but doesn't support #2/#3.
TL;DR? I have over-engineered my reconciliation process.