Which statement accurately reflects the relationship between modified accrual basis and measurement focus?

The relationship between the modified accrual basis and measurement focus is critical to understanding governmental financial reporting. The modified accrual basis is specifically designed for governmental funds, which are resources that are used to provide public services. This basis of accounting recognizes revenues when they are measurable and available to finance expenditures of the current period, while expenditures are recognized when the related fund liability is incurred, with exceptions for long-term liabilities.

The measurement focus, meanwhile, determines what is reported in the financial statements, emphasizing either the flow of current financial resources (as with modified accrual) or the flow of economic resources (as with full accrual). In governmental funds, the modified accrual basis corresponds to a measurement focus on the flow of current financial resources, which means it is specifically tailored to reflect the financial position and operating results of the fund's current resources.

Therefore, in practice, the modified accrual basis and measurement focus are interconnected for governmental funds. This relationship allows for financial statements to be meaningful and relevant to stakeholders interested in the use of resources over a short-term period, which is critical in the context of government operations. The answer accurately reflects the practical application of accounting within governmental contexts.