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

Financial statements have specific characteristics that define their nature. Let's examine each option:

Option 1 states that historical cost is the basis of recording transactions. This is indeed a nature of financial statements - assets and liabilities are recorded at their original purchase price as per the Cost Concept.

Option 3 mentions that accounting conventions are followed. This is true - financial statements are prepared following conventions like Consistency, Conservatism, Full Disclosure, and Materiality.

Option 4 states that financial statements are prepared on certain basic assumptions. This is correct - they are based on fundamental assumptions like Going Concern, Accrual Basis, and Consistency.

Option 2 claims that financial statements "cannot be expressed in monetary terms." This is incorrect and hence NOT a nature of financial statements.

Financial statements are prepared strictly in monetary terms. According to the Money Measurement Concept, only those transactions and events that can be expressed in monetary terms are recorded in accounting books. This is a fundamental requirement, not a limitation.

For example, if machinery is purchased for ₹5,00,000, this can be recorded. However, if an employee's skill or goodwill cannot be quantified in monetary terms reliably, it is not recorded until a transaction occurs.

Therefore, the statement "It cannot be expressed in monetary terms" contradicts the very foundation of financial accounting, making Option 2 the correct answer.