Final answer:
Yes, a transaction exists when a student signs a contract for website design for $10,000. The accounts affected are 'Accounts Receivable' (an asset account) and 'Service Revenue' (a revenue account), both increasing by $10,000. The accounting equation remains balanced as assets and owner's equity both increase equally.
Step-by-step explanation:
When a student signs a contract for their first website design for $10,000, several accounting principles come into play to answer the question:
1. Does a transaction exist? Yes, a transaction does exist. In accounting, a transaction is any event that has a monetary impact on the financial statements of a business, and in this case, the signing of a contract is a commitment that will affect the finances of the business.
2. Examine it for accounts affected. The accounts affected would be 'Accounts Receivable' and 'Service Revenue'.
3. Classify each account affected. 'Accounts Receivable' is an asset account, and 'Service Revenue' is a revenue account.
4. Identify direction and amount. 'Accounts Receivable' would increase by $10,000, which represents an inflow of economic benefit, and 'Service Revenue' would also increase by $10,000, reflecting the income earned from the transaction.
5. Ensure the equation still balances. According to the accounting equation (Assets = Liabilities + Owner's Equity), the equation would still balance since the increase in assets (Accounts Receivable) is counterbalanced by an equal increase in owner's equity (Service Revenue).