ACC Online Learning
|What is a change order? Change order is the term used in this course, though numerous other terms exist, such as contract revisions, extras, modifications, amendments. Simply put, as an old contractor once said, "If you build a wall per plans and specifications, and the owner or the owner’s representative decides instead to put a door in the middle of that wall, that’s a change order.” There is the cost of the door, of course, and the extra labor and time to order and install the door. The contractor has a right to seek compensation from the owner for this change, and the owner has an obligation to pay for the change. The contractor and owner may negotiate the price, but at some point, there must be mutual acceptance of the cost. Typically, change orders are not as simple as the one above. They can be, but as a rule, are not. Sometimes change orders can exceed the original contract amount, although that is probably atypical too. Change orders involve changes in quantities, material substitution, mechanical or electrical systems alterations, design changes, exterior modifications, structural changes, and even deletions of work to the original contract. Change orders can cause delays, time extensions, and they usually result in added costs to the original contract. But how change orders are or should be priced, negotiated, the ripple effect they have during the duration of a contract – all these are subjects beyond the scope of this course. This 2-hour interactive online course concentrates on the accounting for change orders – how change orders can be “kept track of” in an accounting system, and how their cost might be captured and their revenue recognized and realized. (Fundamental - 2 hours).|
Andrew Steeno, BS, Accounting, MS, MIS, CPA, has over twenty years of MIS consulting experience to the construction industry. Andy is President of Steeno Consulting, Inc. [www.steeno.com]. Michael Ronk, BA, English, MS, Accounting, CPA, CCFP, has devoted over thirty years to the construction industry. Mike is Director of Construction Services at Kolb+Co. [www.kolbco.com]. Sam P. and Mary Little, Ltd. is a separate corporation.