Which of the following statements about the relationship between the transactions on the Income Statement and Balance Sheet are TRUE:

1. You buy a $100 item of clothing on Afterpay with 25% paid in cash immediately at the time of purchase with the remaining 75% payable in three equal fortnightly instalments. The immediate impact of this transaction at the time of purchase involves incurring an expense of $100, a decrease in profit of $100, an increase in liabilities of $100 and a decrease in equity of $100 (assuming that clothing is not an asset).
2. Your superannuation investments increase in value by $5,000 and you recognise this on your balance sheet with an associated increase in the value of the asset using fair value accounting. Since the change in value of the asset was recognised on your Balance Sheet, there must also be a corresponding $5,000 increase in both income and profit on your Income Statement.

Neither of the statements are true (both are false)

Only statement 1 is true

Only statement 2 is true

Both statements are true (neither are false)