Which of the following is not the nature of financial statements?

The correct answer is Option (2) → It cannot be expressed in monetary terms.

Financial statements are built from recorded facts about events expressed in money. Their nature comes from three things: recorded facts at historical cost, accounting conventions and basic assumptions (postulates). A statement saying that they cannot be expressed in monetary terms denies the very base on which they are prepared, so it is not part of their nature.

Option (1) The original cost or historical cost is the basis of recording transactions. — A feature of financial statements. Assets are shown at the cost recorded in the books, not at market prices.

Option (3) Certain accounting conventions are followed while preparing financial statements. — A feature of financial statements. Conventions such as valuing inventory at cost or market price, whichever is lower, and materiality are followed.

Option (4) Financial statements are prepared on certain basic assumptions. — A feature of financial statements. These assumptions are the postulates: going concern, money measurement and realisation.