What are the main financial statements used in governmental accounting?

The main financial statements used in governmental accounting are the government-wide and fund financial statements. These statements serve different purposes and present financial information in distinct formats tailored to the needs of various stakeholders.

Government-wide financial statements provide an overview of the government's financial position and activities as a whole. They present a consolidated view of all governmental activities, allowing for a comprehensive assessment of the public sector's economic resources and obligations. These statements often include the statement of net assets and the statement of activities, which together offer insights into the overall fiscal health of the government.

On the other hand, fund financial statements focus on individual funds, which are used by governments to manage specific activities or resources. These statements typically include the balance sheet for governmental funds and a statement of revenues, expenditures, and changes in fund balances. They are important for demonstrating compliance with legal requirements and budgetary constraints.

The combination of these two types of financial statements allows stakeholders to gain a complete understanding of the financial situation within the governmental context, making option B the correct answer. This structure is unique to governmental accounting and provides transparency in how public funds are raised and spent. Other choices, such as balance sheets and income statements or cash flow statements and statements of changes in equity, are more commonly associated with for-profit