Question: Many of the figures reported in financial accounting cannot be
absolutely correct. Although $4.731 billion is the asset balance shown by Dell, the cash eventually collected might
be somewhat higher or lower. Should the lack of exactness in reporting receivables cause concern for decision
makers?
Answer: No one will ever be able to predict the exact amount of cash to be received from nearly $5 billion
in accounts receivable. In fact, Note One to Dell’s financial statements specifically states, “The preparation of
financial statements in accordance with GAAP requires the use of management’s estimates. These estimates are
subjective in nature and involve judgments that affect the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities at fiscal year-end, and the reported amounts of revenues and expenses during
the fiscal year. Actual results could differ from those estimates.”
Knowledgeable decision makers understand that some degree of uncertainty exists with all such balances.
However, a very specific figure does appear on Dell’s balance sheet. By including this amount, company officials
are asserting that they have obtained sufficient evidence to provide reasonable assurance that the amount collected