Skip to content

E: Managing Change Orders

In early August, Lakeview asks for a sixth exam room in the east wing. Cedar Ridge Training prices the extra work at $36,000.00. It will cost $27,000.00: $9,000.00 more drywall and $18,000.00 more electrical work, both from the existing subcontractors. Lakeview accepts the price by email on August 12.

In this exercise you:

  1. enter the change as a contract change order with its cost lines;
  2. submit and approve it, which updates the contract, the budget and the schedule of values in one step;
  3. amend the two subcontracts so the subcontractors can bill the extra work.

Before You Begin

  • Exercise D is done: J-101 has an approved schedule of values.
  • Approving a change order needs a Company Admin or Accountant (see Approval Steps).

Step 1: Enter the Change Order

  1. Go to Jobs & Costing → Change Orders and click New Change Order.
  2. Choose Kind Contract: the customer pays a different price.
  3. Enter Contract Amount 36000.00, choose Job J-101, and enter Customer Reference LMP Change Request 4, Date 08/12/2026, Title Add exam room 6 and a Reason.
  4. In Lines, enter the cost side of the change, clicking Add Line for the second line:
Cost Code Cost Type Description Amount
09-100 Drywall SUB Subcontract Exam room 6 drywall 9,000.00
26-100 Electrical SUB Subcontract Exam room 6 electrical 18,000.00
Total 27,000.00
  1. Click Save Change Order.
The New Change Order form: Kind Contract, Contract Amount 36000.00, Job J-101, Date 08/12/2026 and two subcontract lines totaling 27,000.00
Figure 9-39 The exam room change: 36,000.00 to the customer, 27,000.00 of cost.
  1. Kind: Contract changes the price. Cost and Internal Transfer change only the budget.
  2. Contract Amount: the price change the customer agreed to.
  3. Job: the job being changed.
  4. Date: the date of the change, here the day the customer accepted it.
  5. Amount of each cost line: the change to the budget for that cost code and cost type.
  6. Save Change Order saves it as a draft.

The change order is saved as a Draft. In this exercise it was saved twice by mistake, as CO-1 and CO-2; Exercise G withdraws CO-1, so the rest of the project uses CO-2.

Step 2: Submit and Approve It

On the change order page:

  1. Click Submit and confirm. The status becomes Submitted: the change is waiting for a decision.

    The Submit CO-2 dialog asking Submit CO-2 for approval?
    Figure 9-40 Submitting the change order for approval.

  2. Click Approve. The dialog tells you exactly what approval will do. Type a Decision Reason that records how the customer agreed, and click Approve.

    The Approve CO-2 dialog: creates budget revision 2 for 27,000.00 and raises the revised contract from 480,000.00 to 516,000.00
    Figure 9-41 The approve dialog states the budget and contract effect.

The approved change order shows what it created:

CO-2 Approved with Contract Amount 36,000.00, Cost Lines 27,000.00, Budget Revision 2, Contract Revision 36,000.00 and Schedule Line CO-2 · 36,000.00
Figure 9-42 CO-2 after approval, with the records it created.
What Changed Before After
Revised contract 480,000.00 516,000.00
Revised budget (budget revision 2 adds 27,000.00) 360,000.00 387,000.00
Schedule of values (new line CO-2 Add exam room 6) 480,000.00 516,000.00
Planned gross profit 120,000.00 (25.0%) 129,000.00 (25.0%)

The schedule line is added automatically, so the extra work can be billed from pay application 2 onward without revising the schedule by hand.

No Journal Entry Yet

Approving a change order writes no journal entry. The extra revenue is recorded when it is billed on a pay application, and the extra cost when the subcontractors' bills are posted. Until then the change affects only the job's contract, budget and schedule.

See Change Orders.

Step 3: Amend the Subcontracts

The electrical and drywall subcontracts were issued for the original scope. Their lines are frozen, so the extra work is added with an amendment on each.

  1. Open SC-2026-000002 (Brightway Electric) and click New Amendment.
  2. Enter Date 08/14/2026 and Reason Exam room 6 electrical (CO-2), and choose Change Order CO-2 · Add exam room 6.
  3. On the line, choose cost code 26-100 and cost type SUB, and enter Amount 18000.00.
  4. Click Save Amendment.
The New Amendment form: Reason Exam room 6 electrical (CO-2), Change Order CO-2, one line 26-100 SUB 18000.00
Figure 9-43 The electrical amendment, linked to CO-2.
  1. Reason: why the commitment changes.
  2. Change Order: links the amendment to the customer's change.
  3. Amount: the signed change on the line, here an increase.
  4. Save Amendment saves it as a draft.
  1. In the Amendments card, click Approve on amendment 1.
  2. Repeat for SC-2026-000003 (Summit Drywall): Reason Exam room 6 drywall (CO-2), line 09-100 · SUB, Amount 9000.00.
SC-2026-000002 after the amendment: Original 132,000.00, Amendments 18,000.00, Revised 150,000.00, Billed to Date 33,000.00, Remaining 117,000.00
Figure 9-44 The electrical subcontract after its amendment is approved.
Commitment Original Amendment Revised
SC-2026-000002 Brightway Electric 132,000.00 +18,000.00 150,000.00
SC-2026-000003 Summit Drywall 96,000.00 +9,000.00 105,000.00

The four commitments now total $363,000.00 against the revised budget of $387,000.00; the difference, $24,000.00, is the general conditions budget, which Cascade Site Services bills month by month without a commitment.

See Commitment Amendments.

Check Your Work

Check Where Expected
Change orders Jobs & Costing → Change Orders, with the status filter showing all CO-2 Approved 36,000.00; CO-1 Withdrawn
Contract J-101 job page Revised Contract 516,000.00
Budget J-101 Budget Revised 387,000.00, with revision 2 approved
Schedule of values J-101 Progress Billing Six lines totaling 516,000.00
Commitments SC-2026-000002 and SC-2026-000003 Revised 150,000.00 and 105,000.00

Next: F: Closing the Month.