Which one of the following statements is true?

1.Depreciation is a valuation concept; that is, we allocate costs to reflect the actual change in the value of the asset.

2.The adjusting entry for unearned revenues results in an increase to a liability account and a decrease to a revenue account.

3.Expiration of one month of an insurance policy paid in advance, initially recorded by debiting Prepaid Insurance, results in an adjusting entry that reduces the company's liabilities.

4.Adjusting entries never affect cash.

5.None of the above is true.