Comfy Home has an insurance policy for which it pays an annual premium of $6,000. Comfy Home's accountant is preparing journal entries for the month of January. The insurance premium for 2020 was paid in cash on January 2, 2020. What is the journal entry that the accountant should make on January 2 2020?

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Financial Transaction Analysis

The transaction analysis is done with the help of the accounting equation. The basic accounting equation is alternatively known as the balance sheet equation is based on the double-entry system which says that for each transaction happening in a business, at least two accounts should be affected I.e. both the debit side and the credit side should be equal. The Accounting Equation is