Question

Which of the following is true regarding government wide financial statements?

1) They provide information about the financial activities of a specific government entity
2) They are prepared using the cash basis of accounting
3) They include both the financial activities of the government as a whole and its component units
4) They are only used by internal users of financial information

Answer 1

Government-wide financial statements include both the financial activities of the government as a whole and its component units.

Step-by-step explanation:

The correct answer is option 3) They include both the financial activities of the government as a whole and its component units.

Government-wide financial statements provide an overview of the financial activities of an entire government entity, including its component units. These statements are prepared using the accrual basis of accounting, not the cash basis, to capture a more comprehensive picture of the government's financial position and performance.

Government-wide financial statements are important for both internal and external users of financial information, including government officials, investors, and creditors.