Final answer:
The percentage of accounts receivable that are uncollectible is ignored during cash budgeting because these accounts do not result in actual cash receipts. Uncollectible accounts affect accounting provisions rather than cash flows, hence they're not considered in cash budgets. Banks accommodate expected defaults within their financial planning, but excessive defaults can affect their assets and net worth.
Step-by-step explanation:
The percentage of accounts receivable that are uncollectible can be ignored for cash budgeting because no cash is received from an account that defaults. This question relates to the cash budgeting process within a business, which focuses on the forecast and planning of cash inflows and outflows over a specified period. While it may seem counterintuitive, the uncollectible accounts do not impact cash flow since they never result in actual cash transactions.
When preparing a cash budget, a business will take into account expected receipts from customers and potential sales. However, any accounts that are deemed uncollectible would have been previously accounted for as a non-cash adjustment in the provision for doubtful debts on the income statement, thus not affecting the cash budget.
Businesses, such as banks, assume a certain level of risk for uncollectible loans and factor this into their planning. A bank may suffer if the number of loan defaults is significantly higher than expected, leading to a potential decrease in the bank's overall assets and net worth.