The method of Codification should be:

The correct answer is Option (1) → Such that it leads to grouping of accounts

In a computerised accounting system each account head gets a code. The coding scheme follows the hierarchy of groups (assets, liabilities, income, expenses and their sub-groups), so that accounts can be grouped at various levels to prepare the Balance Sheet and the Statement of Profit and Loss.

Option (1) Such that it leads to grouping of accounts — Correct. This is the requirement the book states for the method of codification.

Option (2) An identification of mark — Incorrect. A code does identify an account, but the method is judged by whether it builds the grouping.

Option (3) Easy to understand — Incorrect. Desirable, but not the basis of the codification method.

Option (4) To safeguard assets — Incorrect. Safeguarding assets is an aim of internal control, not of coding accounts.