Which of the following statements regarding adjusting entries is not correct?
1) Adjusting entries nearly always involve the cash account and either a revenue or expense account.
2) Adjusting entries may reduce amounts on the balance sheet and increase corresponding revenue or expense accounts on the income statement.
3) Adjusting entries may be used to recognize revenue as earned and expenses when incurred prior to the receipt or payment of cash.
4) Adjusting entries are often made for interest revenue earned and interest expense incurred.