The need of Codification is :

Codification means assigning codes to accounts or data so that they can be identified and handled systematically. NCERT mainly connects codification with classification and easier processing of accounting data.

However, for this exact CUET question, NTA's official answer key marks "Encryption of data". Option 4, "Easy to process data, keeping proper records", is also strongly supported by the NCERT concept, but we are strictly following NTA's official key. Therefore, Option 1 is taken as correct.