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

It cannot be expressed in monetary terms.

The correct answer is option 2- It cannot be expressed in monetary terms.

1. The original cost or historical cost is the basis of recording transactions. IT IS TRUE. Financial statements are prepared on the basis of facts in the form of cost data recorded in accounting books. The original cost or historical cost is the basis of recording transactions. The figures of various accounts such as cash in hand, cash at bank, trade receivables, fixed assets, etc., are taken as per the figures recorded in the accounting books. The assets purchased at different times and at different prices are put together and shown at costs. As these are not based on market prices, the financial statements do not show current financial condition of the concern.

2. It cannot be expressed in monetary terms. IT IS NOT TRUE as they are expressed in money terms. Financial statements are the basic and formal annual reports through which the corporate management communicates financial information to its owners and various other external parties

3. Certain accounting conventions are followed while preparing financial statements. IT IS TRUE. Certain accounting conventions are followed while preparing financial statements. The convention of valuing inventory at cost or market price, whichever is lower, is followed. The valuing of assets at cost less depreciation principle for balance sheet purposes is followed.  The use of accounting conventions makes financial statements comparable, simple and realistic.

4. Financial statements are prepared on certain basic assumptions. IT IS TRUE. Financial statements are prepared on certain basic assumptions (pre-requisites) known as postulates such as going concern postulate, money measurement postulate, realisation postulate, etc.