OVERVIEW OF

COMPUTERISED
1
ACCOUNTING SYSTEM
Learning Objectives Introduction
After studying this chapter you will be
able to: In modern business accounting transactions are
• Understand the need of processed through computers. Usage of computers
Computerised Accounting and Information Technology (IT) enables a business
System. to quickly, accurately and timely access the
• Appreciate the impact of information that helps in decision-making. This
Information Technology on sharpens the competitive edge and enhances
Financial Accounting System. profitability. The computer systems (Figure 1.1)
• Describe the major works with the data which is processed by the
functions of Accounting hardware commanded by the user through
Information System (AIS). software. The Computerised Accounting System
(CAS) has the following components:
Procedure : A logical sequence of actions to
perform a task.
Data : The raw fact (as input) for any
business application.
People : Users.
Hardware : Computer, associated peripherals,
and their network.
Software : System software and Application
software.
These are the five pillars on which Computerised
Accounting System rests. This chapter discusses
the concept and components of CAS alongwith its
advantages and disadvantages. It is followed by
the discussion of software packages on CAS. In
this chapter we will also discuss the concept about
grouping of accounts and codification methods to
be used for CAS.

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 Computerised Accounting System

1.1 COMPUTERISED ACCOUNTING SYSTEM

Computerised Accounting System refers to the processing of accounting
transaction through the use of hardware and software in order to
produce accounting records and reports. CAS takes accounting

Figure 1.1 : Components of Computer

transactions as inputs that are processed through Accounting Software

to generate the following reports:
• Day books/Journals
• Ledger
• Trial Balance
• Position Statement (Balance Sheet)
• Statement of Profit and Loss (Profit and Loss Account)

Basic flow of Accounting Transaction

2
Figure 1.2 : Data to Information by Business Application Software

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Data and Information

Various elements (items) of accounting transactions are essentially
the data items, which are processed through an accounting software
to generate different sets of information in the form of accounting reports
such as journals, ledger, etc.
A data-item (data element) is the smallest named unit of data in
the information system. In accounting, a transaction consists of four
data elements, such as name of account, accounting code, date of
transaction and amount.

The transaction is a record of inflow and outflow of resources.

We may observe (Figure 1.3) how data (days worked and rate per day)
is being (multiplied together) converted into information (amount to
pay). The information may be viewed as data at one level; and when it
is processed keeping in view the requirements of decision maker, it
becomes the information at another level.

1.2 COMPONENTS OF CAS

The manual system of accounting is
traditionally most popular method of keeping
records of financial transactions of an
organisation. Financial statements are the end
products of the accounting process, which are
prepared in accordance with G e n e r a l l y
Accepted Accounting Principles (GAAP)
(GAAP). The
accounting cycle means the processes involved
in identifying, measuring and communicating
the information. The basic phases of the cycle
are as follows:
Figure 1.3
• Business transactions are analysed.
• The transactions are recorded in the journal.
• Journal entries are posted to the ledger accounts.
• A trial balance is prepared from balances of accounts.
• Accounts are reviewed and the necessary adjustments made.
• Adjustments are posted in the ledger to prepare adjusted trial
balance.
• Adjusted trial balance is used to prepare the balance sheet and
profit and loss account.
• Financial Statements are prepared from the finally adjusted ledger
and balancing the accounts.
The above accounting cycle can be processed through the use of 3
computers.

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1.3 SALIENT FEATURES OF CAS

Following are the salient features required for CAS software:
1.3.1 SIMPLE AND INTEGRATED
CAS is designed to automate and integrate all the business operations,
such as sales, finance, purchase, inventory and manufacturing. CAS
is integrated to provide accurate, up-to-date business information
rapidly. The CAS may be integrated with enhanced MIS (Management
Information System), Multi-lingual and Data Organisation capabilities
to simplify all the business processes of the organisation easily and
cost-effectively.
1.3.2 TRANSPARENCY AND CONTROL
CAS provides sufficient time to plan, increases data accessibility and
enhances user satisfaction. With computerised accounting, the
organisation will have greater transparency for day-to-day business
operations and access to the vital information.
1.3.3 ACCURACY AND SPEED
CAS provides user -definable templates (data entry screens or forms)
for fast, accurate data entry of the transactions. It also helps in
generalising desired documents and reports.
1.3.4 SCALABILITY
CAS enables in changing the volume of data processing in tune with
the change in the size of the business. The software can be used for
any size of the business and type of the organisation.
1.3.5 RELIABILITY
CAS makes sure that the generalised critical financial information is
accurate, controlled and secured.

1.4 GROUPING OF ACCOUNTS

The increase in the number of transaction changes the volume and
size of the business. Therefore it becomes necessary to have proper
classification of data. The basic classifications of different accounts
embodied in a transaction are resorted through accounting equation.
Accounting Equation
The modern accounting is based on double-entry system, which implies
equality of assets and equities (liabilities and capital), i.e.
A = E
Where E = L+C
4 Now A = L+C
Where A = Assets

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E = Equities
C = Capital
L = Liabilities

Thus, Assets = Liabilities + Capital

In this equation the Liabilities means claims on the firm by creditors
and the Capital means claims of owners. The claims of owners keep on
changing due to success (profit) or failure (loss) of the firm. This is
reflected by the income statement, which provides the summary of
income and expenses of business for a given accounting period. Keeping
this in view, the above equation can be re-written as:

Assets = Liabilities + Capital + (Revenues – Expenses)

Each component of the above equation can be divided into groups of

accounts as follows:

Revenue means inflow of resources, which results from the sale of goods or
services in the normal course of business and increase in capital. Expenses
imply consumption of resources in generating revenues.

• EQUITY AND LIABILITIES

§ Shareholder’s Funds
s Share Capital
s Reserves and Surplus
s Money Received against Share Warrents
s Share Application Money Pending Allotment
s Non-Current Liabilities
s Long Term Borrowings
s Deferred Tax Liabilities (net)
s Other Long Term Liabilities
s Long Term Provisions
s Current Liabilities
s Short Term Borrowings
s Trade Payables
s Other Current Liabilities
s Short Term Provisions
5

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• ASSETS
1. Non-Current Assets
s Fixed Assets
s Tangible Assets
s Intangible Assets
s Capital Work-in-Progress
s Intangible Assets Under Development
s Fixed Assets held for Sales
s Non Current Investments
s Deferred Tax Assets (net)
s Long Term Loans and Advances
s Other Non-Current Assets
2. Current Assets
s Current Investments
s Inventories
s Trade Receivables
s Cash and Cash Equivalents
s Short Term Loans and Advances
s Other Current Assets
• REVENUES
§ Sales
§ Other Income
• EXPENSES
§ Material Consumed
§ Salary and Wages
§ Manufacturing Expenses
§ Depreciation
§ Administrative Expenses
§ Interest
§ Selling and Distribution Expenses
There is a hierarchical relationship between the groups and its
components. In order to maintain the hierarchical relationships between
a group and its sub-groups, proper codification is required to ensure
neatness of classification.
1.4.1 CODIFICATION OF ACCOUNTS
According to Concise Oxford Dictionary, the term code means “a system
of letter or figure with arbitrary meaning for brevity and for machine
processing of information”. Thus, code is an identification mark.
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Method of Codification
The coding scheme of Account-heads should be such that it leads to
grouping of accounts at various levels so as to generate Position Statement
(Balance Sheet) and Statement of Profit and Loss (Profit-Loss Account).
For example, we may allot the codes for top-level grouping of accounts
(forming the 1st digit of the Account Code) as follows:

1 Equity and Liabilities

2 Assets
3 Revenues
4 Expenses
Under Equity and : 11 Shareholder’s funds
Liabilities 13 Non-Current Liabilities
14 Current Liabilities
Under Assets : 21 Non-Current Assets
23 Current Assets
Note: The gap in code in the 2nd digit (e.g. after 1, 3 instead of 2) is used to provide
flexibility.

The above codification scheme utilizes the hierarchy present (used)

in grouping of accounts. Major advantage of such coding is that if the
account codes are listed in ascending (i.e. increasing) order, these will
be automatically listed as per the desired hierarchy.

1.4.1.1 Sequential Codes

In Sequential Code, numbers and/or letters are assigned in consecutive
order. These codes are applied primarily to source documents such as
cheques, invoices, etc. A sequential code can facilitate document
searches. This process enables in either identification of missing codes
(numbers) relating to a particular document or a relevant document
can be traced on the basis of code.

For examples:

CODES ACCOUNTS
CL001 GCERT LTD
CL002 XYZ LTD
CL003 ARIL CORPORATION OF INDIA

1.4.1.2 Block Codes

In a block code, a range of numbers is partitioned into a desired number
of sub-ranges and each sub-range is allotted to a specific group. In 7
most of the uses of block codes, numbers within a sub-range follow

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sequential coding scheme, i.e. the numbers increase consecutively.

As an example, dealer codes for a trading firm could be as follows:
CODES DEALER-TYPE
100 - 199 Small Pumps
200 - 299 Medium Pumps
300 - 399 Pipes
400 - 499 Motors

1.4.1.3 Mnemonic Codes

A mnemonic code consists of alphabets or abbreviations as symbols to
codify a piece of information. SJ for “Sales Journals”, HQ for “Head
Quarters” are examples of mnemonic codes. Another common example
is the use of alphabetic codes in Railways in identifying railway stations
such as DLH for Delhi, NDLS for New Delhi, BRC for Baroda, etc.

1.4.2 METHODOLOGY TO DEVELOP CODING STRUCTURE AND CODING

Let us assume that we have to do coding for students in one of seven
schools run by a trust. The first step is to develop a coding structure
(scheme), which will be used to develop individual codes for each
student. Development of coding structure requires identification
(finalisation) of hierarchy of schooling system and that of various
attributes (parameters) associated with a student. A hierarchy in such
a situation could be as follows:

Trust → School → Entry-year → Stream → Class → Section → Student

The “Stream” could be science stream, commerce stream or general

Stream. A class may be divided into more than one section when the
number of admitted students increases the class capacity. We can
decide the coding structure after the following considerations:
• As there is only one Trust, no provision is required in the coding
structure to accommodate for Trust. Had there been multiple trusts
under one organisation running a number of schools, the provision
of Trust code would have been necessary in the coding structure.
• Assuming that the maximum number of Schools is not likely to
exceed 99, we can allocate 2 digits for School.
• Two digits can be allocated for the Entry-year. Entry-year is
necessary to maintain records of old students.
• For Stream, 1 digit is sufficient. If Stream is not relevant
(applicable) as is the case for primary and secondary classes, the
value 0 will be considered for Stream.
8 • To accommodate Classes, 2 digits are sufficient.

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• Number of Sections in a class will not exceed 9. Hence, 1 digit is

sufficient for Section.
• Two digits will be sufficient for number of Students within a section
of a class, assuming that not more than 99 Students will ever be
put in a section of a class.
The coding structure for Students will be as follows based on the
above considerations:
School 2 Digits
Entry-year 2 Digits
Stream 1 Digit
Class 2 Digits
Section 1 Digit
Student 2 Digits
Thus, if we allocate 10 digits codes to a student, we shall be able to
get the following details of a student right from the code itself :
• Which stream in which school the student is studying (had studied)?
• What were the class and its section and in which year the student
had entered this class?
• List of all students who has entered a school in a given year, etc.
Once the coding structure is decided as described above, allotting
of code becomes easy. For example, if a student with a Roll No. 54 had
entered Section-B of Class XII in Year 2008 opting for Science Stream
(Non-Biology Group) (Stream Code: 1) in the 6th School run by the
Trust. Its code would be as follows:

06 08 1 12 2 54

Roll No of the Student in the Section of Class XII

Section Code (2 for Section-B)

Current Class (XII)

Stream (i.e. Science – Non-Bio)

Entry-year to Current Class (i.e. XII)

School Code 9

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1.5 USING SOFTWARE OF CAS

There are two basic activities in using software of CAS – One time activities
and recurring activites. One time activities include creation of
Organisation details, accounting year, type of ledger (also called “creation
of master files” ), etc. While reccuring activities include entry of
transactions and generation of reports. The transactions are recorded on
the basis of Cash Vouchers, Bank Vouchers, Purchase Vouchers, Sales
Vouchers, Journal Vouchers, etc. Reports include generation of Day books,
Ledgers, Trial Balance, Statement of Profit and Loss, Position Statement
and Cash Flow Statement. (Please refer to Chapter 5 for details)
SECURITY FEATURES OF CAS SOFTWARE
Every accounting software ensures data security, safety and
confidentiality. Therefore every, software provides the following:
• Password Security
• Data Audit
• Data Vault
Password Security: Password is a mechanism, which enables a user
to access a system including data. The system facilitates defining the
user rights according to organisation policy. Consequently, a person
in an organisation may be given access to a particular set of a data
while he may be denied access to another set of data.

Password is the key (code) to allow the access to the system.

Data Audit: This feature enables one to know as to who and what
changes have been made in the original data thereby helping and fixing
the responsibility of the person who has manipulated the data and also
ensures data integrity. Basically, this feature is similar to Audit Trail.
Data Vault: Software provides additional security through data
encryption.

Encryptio
Encrypti o n essentially scrambles the information so as to make
its interpretation extremely difficult (almost impossible). Thus,
Encryption ensures security of data even if it lands in wrong
hands, because the receiver of data will not be able to decode
and interpret it.

1.6 ADVANTAGES OF CAS

Following are the advantages of Computerised Accounting System (CAS):
1. Timely generation of reports and information in desired format.
10 2. Efficient record keeping.
3. Ensures effective control over the system.

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4. Economy in the processing of accounting data.

5. Confidentiality of data is maintained.

1.7 LIMITATIONS OF CAS

Following are the limitation of CAS software:
1. Faster obsolescence of technology necessitates investment in
shorter period of time.
2. Data may be lost or corrupted due to power interruptions.
3. Data are prone to hacking.
4. Un-programmed and un-specified reports cannot be generated.

1.8 ACCOUNTING INFORMATION SYSTEM (AIS)

Accounting Information System (AIS) and its various sub-systems may
be implemented through Computerised Accounting System. The
subsystems of AIS are briefly described below (Fig. 1.4)

Figure 1.4 : The sub-systems of Accounting Information System

1.8.1 CASH AND BANK SUB-SYSTEM

It deals with the receipt and payment of cash both physical cash and
electronic fund transfer. Electronic fund transfer takes place without
having the physical entry or exit of cash by using the credit cards or
electronic banking.
1.8.2 SALES AND ACCOUNTS RECEIVABLE SUB-SYSTEM
It deals with recording of sales, maintaining of sales ledger and 11
receivables. It generates periodic reports about sales, collections made,

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overdue accounts and receivables position as also ageing schedule of

receivables/debtors.
1.8.3 INVENTORY SUB-SYSTEM
It deals with the recording of different items purchased and issued
specifying the price, quantity and date. It generates the inventory
position and valuation report.
1.8.4 PURCHASE AND ACCOUNTS PAYABLE SUB-SYSTEM
It deals with the purchase and payments to creditors. It provides for
ordering of goods, sorting of purchase expenses and payment to the
creditors. It also generates periodic reports about the performance of
suppliers, payment schedule and position of the creditors.
1.8.5 PAYROLL ACCOUNTING SUB-SYSTEM
It deals with payment of wages and salary to employees. A typical wage
report details information about basic pay, dearness allowance, and
other allowances and deductions from salary and wages on account of
provident fund, taxes, loans, advances and other charges. The system
generates reports about wage bill, overtime payment and payment on
account of leave encashment, etc.
1.8.6 FIXED ASSETS ACCOUNTING SUB-SYSTEM
It deals with the recording of purchases, additions, deletions, usage of
fixed assets such as land and buildings, machinery and equipments,
etc. it also generates reports about the cost, depreciation, and book
value of different assets.
1.8.7 EXPENSE ACCOUNTING SUB-SYSTEM
This sub-system records expenses under broad groups such as
manufacturing administrative, financial, selling and distributions and
others.
1.8.8 TAX ACCOUNTING SUB-SYSTEM
This sub-system deals with compliance requirement value-added tax
(VAT), excise, customs and income tax. This sub-system used in large
size organisation.
1.8.9 FINAL ACCOUNTS SUB-SYSTEM
This subsystem deals with the preparation of Profit and Loss accounts,
Balance Sheet and cash flow statements for reporting purposes.
1.8.10 COSTING SUB-SYSTEM
It deals with the ascertainment of cost of goods produced. It has linkages
with other accounting sub-systems for obtaining the necessary
information about cost of material, labour, and other expenses. This
12 system generates information about changes in the cost that takes
place during the period under review.

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1.8.11 BUDGET SUB-SYSTEM

It deals with the preparation of budget for the coming financial year as
well as comparison with the current budget of the actual performances.
1.8.12 MANAGEMENT INFORMATION SYSTEM
Management Information System (MIS) deals with generation and
processing of reports that are vital for management decision-making.
The Information system should be so flexible as to provide customised
reports to support various managerial functions such as planning,
organising, staffing, oversight, control and decision-making including
operational, functional and strategic nature.

Summary
• In Computerised Accounting System, accounting transactions are processed
using computer system. A computer system includes hardware and software.
Hardware includes Central Processing Unit (CPU), Random Access Memory
(RAM), Monitor (Screen), Keyboard, Mouse, Hard Disk and CD/DVD for mass
storage of data and Printer, etc. Software consists of set of instructions.
Software can either be a System Software (a part of Computer System) or an
Application Software. CAS uses Accounting Software. Accounting Software
(such as Tally) is an example of Application Software.
• Coding (for Account Head, Budget Head, Cost Centres, etc) is required in
CAS. Coding first requires development of its structure. Coding Structure
should be compatible with inherent structure of the element to be coded.
For example, Account Head coding requires a hierarchical structure to
progressively summarise the accounting information as per the requirements
of Balance Sheet and Profit and Loss Account.
• Advantages of CAS include speed, efficiency, arithmetic accuracy, cost saving,
confidentiality of data.
• Limitations of CAS include provision for (a) fast obsolescence of technology,
(b) data loss due to either power interruptions or damage to hard disk,
(c) virus and other security hazards.
• Accounting Information System is an integration of various sub-systems
such as: (i) cash sub-system, (ii) sales and accounts receivable sub-system,
(iii) inventory sub-system, (iv) purchase and accounts payable sub-system,
(v) payroll accounting sub-system, (vi) fixed asset accounting sub-system,
(vii) expense accounting sub-system, (viii) tax accounting sub-system,
(ix) final accounts sub-system, (x) costing sub-system, (xi) budget sub-system,
(xii) management information sub-system.
13

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 Chapter 13 Entrepreneurship

Entrepreneurs are the harbingers of prosperous society. 13.1 Concept of

An entrepreneur not only creates employment but also Entrepreneurship
contributes to the economic development of the country. 13.2 Sources of Funds
With the growth of scientific temperament in society 13.3 Entrepreneurship
people who have created enterprises based on scientific in Biotechnology
discoveries have grown in large numbers. One such field 13.4 Concept of IPR
of entrepreneurship is based on biotechnology. This 13.5 Biopiracy
chapter highlights the role and relevance of entrepreneurs
in general and biotech entrepreneurs in particular. The
chapter also has exhibits of cases from the real world about
entrepreneurs who have curved a niche for themselves by
successfully launching biotechnology-based enterprises.
Besides, the chapter also discusses the contemporary
legislations governing biotechnology-based enterprises.

13.1 CONCEPT OF ENTREPRENEURSHIP

The root word for the term ‘entrepreneur’ is the
French word ‘enterprendre’ that means ‘to undertake’.
Entrepreneur thus, is an individual who undertakes an
activity foreseeing business opportunity. An entrepreneur
organises resources needed for starting the enterprise and
also bears the risk involved in the process. Thus, there

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 are three prominent roles that an entrepreneur fulfils—an
innovator, organiser and a risk bearer.
While performing the three roles mentioned above, an
entrepreneur does significant tasks for self and the society.
As an innovator, an entrepreneur is the person who brings
out new products into the market. As an organiser, he/
she organises the factors of production in order to take
advantage of opportunity in the market. Finally, as a risk
bearer he/she shoulders all uncertainties associated with
the venture.

Box 1

1. Howard Stevenson (1983) defined that “Entrepreneurship is the process by which

individuals pursue opportunities without regard to the resources they currently control.”
2. “Entrepreneurship is the persistent progression towards an innovative solution to a key
problem. It’s the constant hunger for making things better and the idea that you are
never satisfied with how things are.” – Debbie Roxarzade, founder and CEO of Rachel›s
Kitchen
3. “At its core, [entrepreneurship] is a mindset – a way of thinking and acting. It is
about imagining new ways to solve problems and create value. Fundamentally,
entrepreneurship is about...the ability to recognise [and] methodically analyse [an]
opportunity, and ultimately, to capture [its] value.” – Bruce Bachenheimer, Clinical
Professor of Management and Executive Director of the Entrepreneurship Lab at Pace
University
4. “To be a successful entrepreneur you must have a passion for learning – from customers,
employees and even competitors.” – James Bedal, CEO of Bare Metal Standard

13.1.1 Importance of entrepreneurship

Entrepreneurship is widely regarded as the best way to
augment the growth of an economy. Entrepreneurs have
played a significant role in developing some of the best
economies of the world like that of USA and Japan. In
India too we have had several communities who have
played a significant role of entrepreneurs for the economic
development of our nation. Entrepreneurs are the prime
movers of innovation and the introducers of new products
into the market. Therefore, they play a key role in improving

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 the lives of our societies. Enumerating the importance of
entrepreneurship, we see that they:
(a) help in capital creation by bringing together the
resources of the people.
(b) are employment creators and their role is pivotal. By
creating employment opportunities, the standard of
living of people increases and also the purchasing
power of the people augments.
(c) help in developing total community. If employment
is diversified among small entrepreneurial units, it
promotes overall standard of living leading to stability
and higher quality of community life.
For people who are open to challenges and ready to take
risks, entrepreneurship is the most appealing activity the
success of which can be hugely rewarding. Entrepreneurs
are an asset to any nation, they change the lifestyle of
the people of a country by introducing new products and
services. If we look at the Indian Information Technology
(IT) revolution in the early 1990s, we see that the effect of
this has led to phenomenal growth of the Indian economy
in itself over the years. This IT revolution created many
ancillary industries that became valuable creators of
employment opportunities for the youth of our country.
Today, the start-up revolution has taken the whole of India
by storm. The Government promotion of entrepreneurial
spirit through various schemes and tax benefits has
made entrepreneurial efforts worth trying.
Entrepreneurship is regarded as the panacea for the
unemployed in an economy. Self-employment empowers
an individual and helps in bringing about the social change
for community development.

13.1.2 Qualities of a successful entrepreneur

India has had some of the finest entrepreneurs in history
that laid the foundation of Indian economy. We can see
that they all possess certain distinct qualities, some of
which are summarised below:
1. Initiative: Being an innovator is a significant
characteristic of an entrepreneur. Entrepreneur takes
initiative at the right time to launch a venture, enduring
all the struggles of initiation of a new venture.

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 Box 2

Story of Dr Krishna Ella, founder of Bharat Biotech International Ltd.

As students we sometimes ask our teachers or ourselves “Why am I learning this? Will
I even use it in real life?”. Well, if your life goals are similar to those of Dr. Krishna
M.Ella,that is, to create massive positive changes through scientific innovation,then you
just might.
Dr. Ella is the Chairman and Managing Director of Bharat Biotech International
Limited (BBIL), which he co-founded with his wife in 1996 in Hyderabad, Telangana.
A person hailing from a rural background and born in a village Nemili in Tamil Nadu,
started his early education from the same village, had his share of ups and downs to
achieve the feat what he is today. He completed his higher schooling and intermediate
course in Life Sciences from Madras followed by completing his higher degrees in
Agriculture from Maharashtra and later from Karnataka. In order to gain marketing
experience, he worked with the Agricultural Division of a Pharmaceutical company in
India as well.
He also pursued Masters in Science (specialisation in Plant Pathology) at the
University of Hawaii and doctoral programme at the University of Wisconsin, Madison,
after getting a scholarship. Followed by his Ph. D. in 1993, Dr. Ella joined the Medical
University of South Carolina, Charleston, where he made a shift from Plant Pathology
to human and yeast molecular biology. While conducting regular research, he started
thinking of innovative ideas for the development and production of Recombinant
Hepatitis B Vaccine.
In 1996, Dr. Ella returned to India and with the encouragement of his wife and
his mother, set up a small laboratory in the city of Hyderabad. Their prime objective
was to innovate in the development of affordable vaccines and biotherapeutics. As
they wanted India to be known as the country that innovated and the name ‘Bharat
Biotech International Ltd., was chosen. BBIL was established in 1997 in Hyderabad
with the funds and assistance from angel investors. Since its inception, BBIL has
produced over 4 billion doses of various human vaccines for diseases such as Hepatitis
B, Rabies, Diphtheria, Rotavirus, and corona virus, etc., most of them for the Universal
Immunisation Programme of India and for more than 120 developing countries to
safeguard global public health.
COVAXIN® is Bharat Biotech’s 17th Vaccine and the first COVID-19 Vaccine which
made in India. Dr. Ella and his team developed COVAXIN®, the inactivated whole virus
and adjuvanted vaccine, in a record time of just eight months. COVAXIN® has been in
use as a life saving vaccine against the COVID-19 pandemic since December 2020 across
India and many other developing countries. WHO has also approved COVAXIN for
emergency use against COVID-19.
Dr. Ella once said, “Solving today’s problem is not innovation, it is
the ability to predict the future problem and finding solutions to solve an
important problem, something that matters to public health.” He strongly
believes in the potential of upcoming generation of students to shape
the future of India. “For students of science, their focus on academic
performance today can yield a better life for them and also for everyone
around them. Many years from now, there will be a new generation of
science students reading about a different entrepreneur in their textbook.
You can be that entrepreneur too!”
(Courtesy: Bharat Biotech International Limited (BBIL) )

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 2. Knowledge and skill: An entrepreneur is a skilled
individual who possesses the relevant knowledge
relating to the industry, economy, consumer choices,
technology, etc., and prospects of growth for the same
in future.
3. Risk taker: An entrepreneur is ready to take the
uncertainties associated with the enterprise. An
entrepreneur has the foresight to accept the long-term
prospect of success for the enterprise. In doing so,
he/she is ready to withstand the short-term risks
associated with the venture.
4. Adaptability: An entrepreneur is adaptable to the
changing business environment. As an entrepreneur
starts and grows the business, they constantly
monitor the business environment and adapt
themselves to the changes taking place in it.
5. Self-confidence: An entrepreneur is confident of the
decisions they are taking. This self-belief is a key factor
that makes entrepreneurs successful and acts as a
catalyst in making them take up risks.
6. Wealth creators: Entrepreneurs are wealth creators
that translate great ideas into commercial success.
Those who succeed after taking these risks turn out
to be wealth creators for themselves and for the nation
they belong to, by providing valuable employment
opportunities to the people. Thus, it is seen that every
successful and economically developed nation has
nurtured and promoted the entrepreneurial spirit
among its people.

13.1.3 Difference between Entrepreneur

and Intrapreneur
Entrepreneur and intrapreneur have similar values—
that of innovation and creativity, the two are often
used interchangeably. However, an entrepreneur and
intrapreneur have distinctive differences. An entrepreneur
is a person who takes risks to start a business venture
in order to earn profit. They foresee the opportunities
for products and services and coordinates with the factors
of production to establish an enterprise. On the other
hand, an intrapreneur is an employee of an organisation
who promotes innovation among the employees of the
organisation. They are hired to bring about success in a
business venture.

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 13.1.4 Planning and Resourcing an Enterprise

Business Planning—Preparation of a
Feasibility Report
While starting a new business venture, an entrepreneur
is interested in knowing if it is feasible to start and run
the enterprise. This is where a feasibility report needs to
be prepared to evaluate the business idea and confirm the
validity of the same.The steps in preparing the feasibility
report are as under:
Step One: Conduct a Preliminary Analysis
The first step in checking the feasibility of a business
proposition is the screening of the project idea before
investing extensive time, money and effort in the same. The
entrepreneur describes as precisely as possible the product
or service, the set of activities and the target market along
with the way the new product or service is different from
the existing one being offered in the market. If the analysis
in the preliminary stage projects that there are chances of
grave obstacles and unsurmountable hindrances, then it is
advised not to proceed further with the venture idea. While,
if the preliminary analysis shows positive outcomes, the
entrepreneur conducts other stages of the feasibility analysis.
Step Two: Prepare a Projected Income Statement
An Income Statement covering the direct and indirect costs
is prepared. It should take into account the anticipated
income growth curve. A backward computation of the
projected income and the revenue necessary to generate
that income can be derived to build a projected income
statement.
Step Three: Conduct a market survey
A good market survey is essential for a realistic projection
of revenue. The major steps in a market survey are as
follows:
1. Define the geographic influence on the market.
2. Analyse the environmental factors influencing a
market.
3. Analyse the competitors in the market.
4. Determine the total volume in the market area and
estimate the expected market share.
5. Estimate the market expansion opportunities.

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 Step Four: Plan business organisation and operation
In this stage, the operation and organisation structure
of the business should be planned in detail to determine
the technical feasibility and the costs associated with the
start-up, the fixed investment and operation.
Step Five: Prepare an Opening Day Balance Sheet
The opening day balance sheet must reflect the assets and
liabilities of the proposed venture as accurately as possible.
The list must be a detailed account of source, cost and the
method of financing the same. The liabilities incurred and
investment required by the venture at the time of inception
need to be clarified in detail.
Step Six: Review and analyse the data
This step is significant so that the business planner
rechecks the steps performed so far. The projected Balance
Sheet is re-examined and also evaluated for the risks and
contingencies.
Step Seven: Decision Stage
This is the last stage in which the entrepreneur decides
whether he/she should or should not proceed with the
business idea. The entrepreneur decides to go ahead with the
business idea only if the projections indicate growth potential
and a minimum income. Anything that shows low growth
prospect means that the business idea is not worth investing.

13.2 SOURCES OF FUNDS

Define Start-up
In entrepreneurial terminology, the term ‘Start-up’ has
become a popular word. Under the Startup India Action
Plan, startups that meet the definition as prescribed under
G.S.R. notification 127 (E) dated 16 January, 2019 are
eligible to apply for recognition under the programme. The
startups have to provide support documents at the time of
application.
Eligibility criteria for startup recognition:
(a) The startup should be incorporated as a private
limited company or registered as a partnership firm
or a limited liability partnership.
(b) Turnover should be less than INR 100 crores in any
of the previous financial years.

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 (c) An entity shall be considered as a startup up to 10
years from the date of its incorporation.
(d) The startup should be working towards innovation or
improvement of the existing products, services and
processes and should have the potential to generate
employment and create wealth. An entity formed by
splitting up or reconstruction of an existing business
shall not be considered a ‘Startup’.
Assuming that a new enterprise would be a startup, here
are seven sources of financing the new venture:
1. Personal investment: The first investor in a business
is the ‘entrepreneur’ himself/herself. By putting in his/
her own money, the entrepreneur proves to bankers
and other investors, his/her long-term commitment to
the venture.
2. Venture capital: Venture capitalists are investors that
look for technology driven enterprises and companies
that have a high growth potential. Some of the high
growth potential sectors are Information Technology,
Biotechnology, etc. The Venture Capitalists take an
equity position in the company in order to help in
developing a high-risk venture. They look for high
return on investment when the business is developed,
after which they may exit.
3. Angel investors: Angel investors are generally, wealthy
individuals who invest in promising startups. These
investors are very often leaders in their own fields, who
invest money, ideas and experience in the promising
ventures. They tend to finance the early stages of
business.
4. Business incubators: Business incubators, also called
accelerators, are investors who support high-tech
sector by giving support to them in various stages of
development. There are incubation centers in academic
institutions and industrial cooperatives as well.
Incubation phase lasts generally for two years only.
5. Government grant and subsidy: Government
agencies provide financing such as grants and
subsidies in order to promote business.
6. Bank loans: These are the most commonly used
source of funding business ventures. For being eligible
for a bank loan, a good idea itself is not enough, it
should be complimented by an appealing business
plan. Loans for start-ups typically require a personal
guarantee from the entrepreneur.

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 13.3 ENTREPRENEURSHIP IN BIOTECHNOLOGY
13.3.1 Significance of Biotechnology
Entrepreneur
Biotechnology entrepreneurship consists of all the activities
that an entrepreneur does to build and sustain an enterprise
based on biotechnological innovation. It is an enterprise
built by the amalgamation of science and business.
Some definitions of Biotechnology Entrepreneurship
given by experts are as under:
1. ‘Biotechnology’ by accepted definition, involves the
use of living organisms or parts of living organisms
through biological processing to develop new products
or provide new methods of production—‘Damian Hine
and John Kapeleris (2006)
2. The entrepreneur conceptualises, creates and
commercialises a biotechnology product. Some of
the life-saving medical products, advanced fuels and
efficient crops have been researched, developed and
commercialised through biotechnology enterprises.
The concept of bio-entrepreneurship was elaborated
by A.D. Meyers (2008) as “Bio-entrepreneurship is the
process of creating value from life science innovation.
It is referred to by several names including—bioscience
entrepreneurship, life science entrepreneurship or
bioscience enterprise. Whatever the descriptor, the
fundamental notion is about moving a life science
discovery or invention from the research phase through
development to a commercial market.” Entrepreneurs
are the harbingers of ideas that impact our lives. Human
lifestyles have changed, developed and progressed due to
the new products, services, ideas, events and technology
introduced by entrepreneurs from time to time.
Biotech entrepreneurs are the backbone of biotech
industry. They are the innovators with a vision that their
idea will impact the life of masses for better. Biotech
entrepreneurs start companies for the reasons given as
under:
1. Biotech entrepreneurs believe that their ideas can
solve a real-life problem of people around the world.
2. Biotech entrepreneurs are found to be altruistic in
nature while starting their enterprise.

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 13.3.3 Process of starting a Biotech
enterprise
Starting an enterprise requires intense planning and does
not happen without a proper roadmap in place. The element
of ‘chance’ should be avoided and rationale should be
present for every action taken while starting an enterprise.
As the words of Louis Pasteur go, “chance only favors the
prepared mind”, an entrepreneur must be prepared for
the outcome of his actions. This is true for all enterprises
and also for biotech entrepreneurs. Following are the steps
that are critical to starting a biotech enterprise:
Step 1: Need assessment
The entrepreneur should conduct a thorough assessment
of the market demand for the product. The entrepreneur
must be absolutely sure that there is a real market need
for the product to be offered. Also, one has to be sure
that the technology of interest is protected by intellectual
property (IP). Finally, the entrepreneur needs to secure
the assets, IP rights and assurances from the inventors
and key personnel (in case the promoter is not the only one
involved in the business).
Step 2: Identification of founders and key personnel
A new entrepreneur must look for like minded individuals
who can join the team and bring the idea into reality.
Generally, we see that a new entrepreneur works
collectively with a team of people with expertise in
diverse disciplines. Selecting this key group of people is a
challenge, yet this group is indispensable to the success
of an entrepreneurial idea.
Step 3: Getting a legal expert
This individual is a key partner. A legal advisor will be the
individual the promoter will go to for advice and guidance.
He will help the promoter move through the corporate and
business issues during all the stages of establishing and
growing his company.
Step 4: Incorporation as a Limited Company
It is advisable for the entrepreneurs of Biotechnology
based start ups to register their companies as Private
Limited Companies under the provision of the Companies
Act 2013. Due to the nature of the business that demands

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 high capital investment and an above average gestation
period, a Limited enterprise would be the best fit for a
Biotechnology Startup.
Step 5: Design a marketing and business strategy
A well-designed business and marketing strategy are the
next requirements. It will not be possible to raise money
unless it clearly describes the market problem and need
for the product, how the new product will solve the need,
how much money the new product will generate, how the
fund generated will be utilised and the expected return on
investment.
Step 6: After the seed capital is raised the technology
development should be the focus
It is important to highlight the key product development
milestones in biotechnology ventures. The product is the
pivot in a biotech enterprise and hence innovation in the
same must be consistent to keep the market sentiments
positive to establish and grow.

13.4 CONCEPT OF IPR

The proprietary aspect is the key feature of biotechnology
of modern times. In the past, innovations in biotechnology
came out only of publicly funded laboratories. In present
times, biotech innovations are well protected within legal
framework of Intellectual Property Rights (IPR).
With the Trade Related Aspects of Intellectual Property
Rights (TRIPS) Agreement of World Trade Organisation
(WTO), the Intellectual Property Rights attained the
authority to enforce the law internationally. According to
TRIPS, the intellectual property rights are:
Copyright and Related Rights
1. Rights of artists, painters, musicians, sculptors,
photographers and authors for copyright in their
works.
2. Rights of computer programmes, whether in source
or object code for a copyright in their programmes
and compilation of data.
3. Rights of performers, producers of phonograms and
broadcasting organisations in respect of fixation on
their programmes for copyright in their work.

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 4. Right of traders in their trademarks.
5. Right of manufacturers and producers on geographical
indication in relation to such products and produce.
6. Right of designers for their distinctive design striking
to the eye.
7. Right of the inventor for patent of his/her invention.
8. Rights of plant breeders and farmers.
9. Rights of biological diversity.
10. Right of computer technologist for their layout design
of integrated circuits.
11. Right of businessmen for protection of their
undisclosed information on technology and
management.

13.4.1 The aspects of IPR involved in

Biotechnology

(a) Patent
The Patents Act 1970, along with the Patents Rules 1972,
came into force on 20th April 1972, replacing the Indian
Patents and Designs Act 1911. The Patents Act was largely
based on the recommendations of the Ayyangar Committee
Report headed by Justice N. Rajagopala Ayyangar. One of
the recommendations was the allowance of only process
patents with regard to the inventions relating to drugs,
medicines, food and chemicals.
Later, India became signatory to many international
arrangements with an objective of strengthening its patent
law and coming in league with the modern world. One
of the significant steps towards achieving this objective
was becoming the member of the TRIPS system. Being
a signatory to TRIPS, India was under a contractual
obligation to amend its Patents Act to comply with its
provisions. India had to meet the first set of requirements
on 1 January 1995 to give a pipeline protection till the
country starts granting product patent.
On 26 March 1999, Patents (Amendment) Act, 1999
came into force retrospective effect from 1 January 1995.
The second phase of amendment was brought in by the
Patents (Amendment) Act, 2002 which came into force on

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 20 May 2003. The third amendment to the Patents Act,
1970 came by way of Patents (Amendment) Ordinance,
2004, which was later replaced by The Patent (Amendment)
Act, 2005, and Patents (Amendment) Rules, 2006 with
retrospective effect from 1 January 2005. With the third
amendment, India met with the international obligations
under the TRIPS. The most recent amendment The Patent
(Amendment) Rules 2020 (“Amended Rules”) have come
into force on 20 October 2020. By way of the Amended
Rules, certain amendments have been made to Form
27 (“New Form 27”). Form 27 is the form prescribed for
patentees and licensees to furnish statements regarding
working of their patent in India.
Section 5, an important section of the Indian Patent
Act,1970 was deleted by the 2005 Amendment Act to allow
product patents in the area of biotechnology, chemicals
and pharmaceuticals. The basic criteria for a patent to be
granted are novelty, non-obviousness (inventive step) and
utility. For a patent to be granted in India, it should not
be covered in the negative list in Section 3 which provides
an extensive list of what are not considered as inventions
under the Indian Patents Act. The inventions related to
DNA molecules or sequences must not be contrary to
public order and morality.
The biotechnology industry is devoted to the
development of commercially valuable therapeutic,
biochemical and pharmaceutical products and processes
among others. Many of these products and processes
revolve around the manipulation of DNA molecules and
their encoded proteins. In the last thirty years, great
strides have been made in the field of biotechnology and
particularly in recombinant DNA research. However, with
this progress has come a degree of uncertainty regarding
the obviousness of certain biotechnological inventions.
For example, procedures of cloning genes and
transporting them between organisms have become
common place. The ready accessibility of these methods
along with the central doctrine of molecular biology, i.e.,
DNA is transcripted into RNA, which in turn is translated
into functional or structural protein molecules, has created
a somewhat disarrayed legal structure.

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 In India, only inventions are patentable while
discoveries are not. There is a clear distinction between
inventions and discoveries as the law specifies that only
inventions create patentable subject matter. Indian
patent law provides for a demonstrative list where it has
mentioned the subjects that are not patentable. Any
subject matter, which does not fall within the domains of
the demonstrated list, does establish a patentable subject
matter. The list has been updated and altered to comply
with the provisions of the TRIPS.

(b) Plant Breeder’s Rights and Farmer’s

Variety Act
Plant breeder’s rights (PBRs) are used to protect new
varieties of plants by giving exclusive commercial rights
for about 20–25 years to market a new variety or its
reproductive material. The variety must be novel, distinct,
uniform and stable. This protection stops anyone from
growing or selling the variety without the permission of
owner. Exceptions may be made, however, for both research
and the use of seed saved by a farmer for replanting.

(c) Trademark
The Trademark Act, 1999 under Section 2 (zb) defines
‘trade mark’ as “a mark capable of being represented
graphically and which is capable of distinguishing the goods
or services of one person from those of others and may
include shape of goods, their packaging and combination of
colours…” Besides, the Act also provided for the definition
of ‘mark’ under Section 2(m), which enumerates a mark
to include a device, brand, heading, label, ticket, name,
signature, word, letter, numeral, shape of goods, packaging
or combination of colours or any combination thereof.
Two essential ingredients for Trademark registration
1. The mark is capable of being represented graphically.
2. Capable of distinguishing goods and services of one
person from those of others.

(d) Copyright
Copyright is a right given by the law to the creator of
literary, dramatic, musical and artistic work and the
producers of cinematograph films and sound recordings.

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 13.5 Biopiracy
When there is commercial exploitation of biochemicals or
genetic materials which occur naturally, it is known as
biopiracy. Generally, indigenous people have traditional
understanding of biological features and genetic diversity
of the natural environment passed on from one generation
to another. Few of the traditional knowledge relevant to
global survival has the elements listed below:
1. Farming or agriculture
2. Medicinal plants
3. Varieties of food crops
There have been cases of infringement of rights towards
traditional materials in recent times. Here are some
examples:
1. A case of biopiracy by multinational corporations
is that of the Neem tree of India. The patent for
Neem was granted by the European Patent Office
to the United States Department of Agriculture
and the Chemical Multinational, W.R. Grace, in
1995. This was opposed by the International
Federation of Organic Agriculture Movement
and the Green Party in European Parliament.
In 2000, the European Patent Office revoked the
patent.
2. In 1995, two expatriate Indians at the University of
Mississippi Medical Centre were granted U.S. Patent
5,401,504 on ‘Use of Turmeric in Wound Healing’.
The claim covered ‘A method of promoting healing
of a wound by administering turmeric to a patient
afflicted with wound’. This patent also granted them
the exclusive right to sell and distribute turmeric.
In 1996, The Council of Scientific and Industrial
Research (CSIR), India, New Delhi, requested the US
Patent and Trademark Office (USPTO) to revoke the
patent on the grounds of existence of prior art. It
could provide documentary evidence of traditional
knowledge including ancient Sanskrit text and a
paper published in 1953 in the Journal of the Indian
Medical Association that proved that turmeric was
already used by Indians for healing. The patent was
revoked in 1997 after ascertaining that there was no
novelty.

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 3. In late 1997, an American company RiceTec Inc, was
granted a patent by the US patent office to call the
aromatic rice grown outside India ‘Basmati’. RiceTec
Inc had been trying to enter the international Basmati
market with brands like ‘Kasmati’ and ‘Texmati’
described as Basmati-type rice with minimal success.
Basmati rice means the ‘queen of fragrance or the
perfumed one.’ This type of rice has been grown in
the foothills of the Himalayas for thousands of years.
RiceTec’s usage of the name Basmati for rice which
was derived from Indian rice but not grown in India,
and hence not of the same quality as Basmati, would
have led to the violation of the concept of Geographical
Identification (GI) and would have been a dishonesty
to the consumers. However, all the patent rights that
were granted were rejected.
In order to curb the biopiracy of traditional medicines,
Traditional Knowledge Digital Library (TKDL) has been
set up which is a pioneering initiative of India to prevent
the misappropriation of country’s traditional medicinal
knowledge at International Patent Offices. Its beginning
dates back to the Indian effort on revocation of the patent
on wound healing properties of turmeric at the USPTO.

SUMMARY
• Entrepreneur is an individual who undertakes an activity
foreseeing business opportunity. They organise resources
needed for starting the enterprise and also bear the risk
involved in the process.
• Entrepreneurship is widely regarded as the best way to
augment the growth of an economy. Entrepreneurs have
played a significant role in developing some of the best
economies of the world like that of USA and Japan. In India
also we have had several communities who have played
the significant role of entrepreneurs for the economic
development of our nation.
• Entrepreneurs are seen to display certain inherent qualities
like that of initiative, knowledge and skill, risk-taker,
adaptability, self-confidence and they are also the wealth
creators.

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