Final answer:
The statement is True. Eliminating inter-fund transactions in government financial statements ensures they show only external receivables and payables, which aligns with government accounting principles and enhances financial clarity.
Step-by-step explanation:
The statement that amounts due to or from other funds should be eliminated from government fund financial statements to show only the receivables from and payables to entities external to the government is True. This practice is consistent with principles of governmental accounting and financial reporting, which aim to present a clear financial picture of a government entity's dealings with external parties. Inter-fund transfers and balances between governmental funds would otherwise obscure the true financial position and operations of the government when reporting to external users.
In a T-account, which is a visual representation of a general ledger account, the separation of assets and liabilities helps to ensure clarity and accountability, similarly to how eliminating inter-fund amounts in government financial statements ensures clarity in reporting. Each entity within the government, such as different funds or trusts, operates like a separate account. As such, the interaction between these internal accounts needs to be reconciled or eliminated to provide an accurate external reporting.