Question

Which of the following is true regarding the preparation of government-wide statements?

A. Balances from enterprise funds' statements are entered in the business-type activities sections of the government-wide statements without adjustment.
B. Interfund activities and balances, within governmental activities are eliminated.
C. Both of the above.
D. Neither of the above.

Answer 1

Balances from enterprise funds' statements are entered in the business-type activities sections of the government-wide statements without adjustment. Interfund activities and balances, within governmental activities are eliminated.

Step-by-step explanation:

In the preparation of government-wide statements, it is true that balances from enterprise funds' statements are entered in the business-type activities sections of the government-wide statements without adjustment. This is because enterprise funds are considered business-like activities and are included in the government-wide financial statements.

Additionally, interfund activities and balances within governmental activities are eliminated in the preparation of government-wide statements. This is done to avoid double-counting or double-reporting of transactions and balances.

Therefore, the correct answer is option C: Both of the above.

Answer 2

In the preparation of government-wide statements, balances from enterprise funds are entered without adjustment into the business-type activities sections, and interfund activities and balances within governmental activities are eliminated. Correct option is C.

Step-by-step explanation:

Regarding the preparation of government-wide statements, the correct answer is C. Both of the above. Specifically, balances from enterprise funds' statements are indeed entered in the business-type activities sections of the government-wide statements without adjustment, aligning with the full accrual basis of accounting that these statements follow. Moreover, interfund activities and balances, particularly within governmental activities, are eliminated in the consolidation process to prevent overstatement of revenues or expenses.