Final answer:
The appropriate measurement focus for agency funds is cash and cash equivalents, as these funds deal with resources held in a custodial capacity that focus on liquid assets.
The correct option is b.
Step-by-step explanation:
The appropriate measurement focus for agency funds is b. Cash and cash equivalents. Agency funds are used to account for resources held by a government in a purely custodial capacity. These resources can include taxes collected but not yet distributed, deposits, or other funds being held for others.
Therefore, the measurement focus is on the near-term inflows and outflows of cash, and the assets that can be easily converted to cash, rather than on the accrual of economic resources or the full accrual accounting that recognizes economic events regardless of when cash transactions occur.
The correct option is b.