Final answer:
For analyzing revenue recognition when sales are recorded on a cash basis, one must apply GAAP or IFRS standards, focusing on whether the revenue is realizable and earned, aligning with the satisfaction of performance obligations and transfer of control to the customer.
Step-by-step explanation:
When analyzing the issue of recording sales on a cash basis and applying revenue recognition standards, we refer to the accounting principles generally accepted in the United States (GAAP) or the International Financial Reporting Standards (IFRS), depending on the jurisdiction in which the business operates. Under both GAAP and IFRS, revenue is recognized when it is realizable and earned, regardless of when the cash is received. To determine the appropriate revenue recognition, one must evaluate if the performance obligations have been satisfied and if the control of goods or services has been transferred to the customer. In week 5, if Ginny records sales on a cash basis, it may not comply with these revenue recognition principles if the cash received does not coincide with the fulfillment of these criteria.