Final answer:
To accurately prepare a Statement of Cash Flows (SOCF), one must create T charts for all three sections: Cash flows from operating activities, Cash flows from investing activities, and Cash flows from financing activities, which represent different aspects of a business's cash movement.
Step-by-step explanation:
Understanding T-Charts in the Statement of Cash Flows (SOCF)
When preparing the Statement of Cash Flows (SOCF), it's important to consider the three primary sections of cash flow activities that describe different aspects of a business's cash movement. These sections are: Cash flows from operating activities, Cash flows from investing activities, and Cash flows from financing activities. Using T-charts is a helpful method to visualize and organize transactions that affect each category of cash flows, ensuring accurate tracking and reporting.
The correct items to remember for making T charts in SOCF are all three sections: the cash flows from operating, investing, and financing activities. Operating activities involve the cash inflows and outflows from the company's principal revenue-producing activities. Investing activities pertain to the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Financing activities relate to transactions that affect a company's equity and borrowings.