folders: folders and subfolders are used to organize documents
categories: categories are a way to classify your information
for example, you could place your financial reports and
documents into a folder name finance and you could classify
or tag your reports that deal with specific financial
matters as payroll,accounts,payble and accounts receiveble

folders are avilable in BO XiR2.we can shedule ,know 
history and procees of yhe report from the folder it self  
where as categories is logical one.we can see the reports.

Folders : ->are used as containers for documents to store 
and organize information within the system.
->folder Can hold many documents.A document can only belogs 
to one folder.However you can create shortcuts to documents 
and place the shortcuts in other folders.

Categories:->Are used to tag documents in a meaningful way 
to classify them for organizational purposes.
->Allows users to view documents acorss the system because 
a category is not constrained by the document's storage 
location.

Folders are place whether it exactly stores the 
documents.Categories are used to classify the documents 
like financial,marketing reports.