The need of Codification is :

The correct answer is Option (4) → The Encryption of data

Note: The given answer is as per the official NTA Answer Key. However, the answer given by NTA appears to be incorrect, and the correct answer should be Option (1), because the book’s own chapter gives brevity and machine processing as the purpose of a code, as explained below.

Codification means giving each account head a short code, a letter or figure, so that the computer can store, sort and group accounts quickly. A good code also follows the grouping of accounts, so the Balance Sheet and the Statement of Profit and Loss can be drawn up straight from the coded heads. That is why codification is needed: for quick processing of data and proper records.

• Option (1) Easy to process data, keeping proper records — Should be correct. A code is short and follows the grouping of accounts, so the computer can sort and process the accounts quickly and the records stay in order.

• Option (2) To secure the accounts, reports, etc. — Incorrect. Accounts and reports are kept secure by passwords and access controls. A code is an identification mark that every user of the system reads.

• Option (3) The Generation of mnemonic code — Incorrect. A mnemonic code is one kind of code (letters that remind the user of the account name). Making one is a way of codifying, not the reason codification is needed.

• Option (4) The Encryption of data — The answer given by NTA, but it seems to be incorrect. Encryption scrambles data so that a person without the key cannot read it. It keeps data secret, while a code is meant to be read and to group accounts.

Note: This question is the NCERT (2026-27) chapter-end question word for word, and the book’s answer key prints “8. a”, that is, the Encryption of data. That seems to be a slip in the book’s key: its own chapter, shown below, says a code is for brevity and machine processing of information.

Advice for the exam: In the real exam, mark the answer that is correct as per accounting principles and the NCERT book. If NTA’s provisional answer key marks a different option, challenge it during the answer-key challenge window, giving proper reasoning. NTA does revise its key when a challenge is well justified, so a sound challenge can raise your marks.