Which of the following best describes the proper reporting for internal balances in government-wide financial statements?

In government-wide financial statements, internal balances refer to transactions between different entities or departments within the same government. The proper reporting of these internal balances is essential for an accurate representation of financial health and performance across all governmental activities.

Choosing the option that states a single line for internal receivables and payables or separate lines for them is permissible as long as the primary government's total column reflects zero balances. This is because the elimination of inter-departmental transactions ensures that financial statements do not mistakenly overstate the financial position by counting amounts that simply move within governmental entities. When internal transactions are accurately represented as zero in the primary government's total column, it provides clarity and transparency regarding the net position of the government as a whole.

Therefore, the correct reporting method can adapt to either single or separate line reporting as long as it maintains a zero balance for the overall reporting of the primary government, allowing for flexibility while adhering to the overall principles of government financial reporting. This flexibility is crucial for accommodating various governmental structures and reporting preferences while still upholding the integrity of the financial statements.