Which of the following statements is FALSE in relation to the cash and accrual basis of accounting? Question 17 options:

1) Under the accrual basis of accounting, income is recognised when it is earned (which is not necessarily when the related cash is ultimately received).

2) Financial accounting reports are generally prepared on what is known as the cash basis.

3) Under the accrual basis of accounting, expenses are recognised as the expense is incurred or consumed (which is not necessarily at the same time as the related cash payment is made).

4) Under the cash basis of accounting, transactions and events are only recorded if they affect cash (that is, if they result in a cash inflow or cash outflow).