Rectifying Journal Entry:-Mohan's A/c. Dr. 7,000 To, Karan's A/c. 5,000 To, Suspense A/c. 2,000

Rectification of Errors in Credit Sales Posting

Introduction:
In this scenario, there has been an error in the posting of credit sales to the wrong account. The sales made to Mohan worth 7000 were mistakenly posted to Karan's account as 5000. To correct this error, we will utilize a suspense account.

Steps to Rectify the Error:

1. Identify the error: The error occurred when the credit sales made to Mohan were posted to Karan's account. This resulted in an incorrect posting of 5000 instead of the actual amount of 7000.

2. Open a suspense account: A suspense account is used as a temporary holding account to rectify errors until they are properly resolved. It allows us to keep the general ledger balanced while the correction is being made.

3. Transfer the incorrect entry to the suspense account: To rectify the error, we will debit Karan's account by 5000 (the incorrect amount posted) and credit the suspense account by the same amount. This will reverse the incorrect entry and balance the accounts.

4. Post the correct entry: Now, we need to post the correct credit sales entry to Mohan's account. We will debit the suspense account by 7000 (the actual amount) and credit Mohan's account by the same amount. This will ensure that the correct entry is recorded and the suspense account is balanced.

5. Reconcile the suspense account: After rectifying the error, the suspense account should be reconciled to ensure that it is back in balance. The debit and credit entries made to the suspense account should be equal, indicating that the correction has been successfully made.

6. Close the suspense account: Once the reconciliation is complete and the suspense account is balanced, it should be closed by transferring the balance to the appropriate accounts. In this case, the balance of the suspense account will be transferred to the respective accounts affected by the error, i.e., Karan's and Mohan's accounts.

Conclusion:
Rectifying errors in credit sales posting is crucial to maintain accurate financial records. By identifying the error, utilizing a suspense account, and making the appropriate entries, we can rectify the mistake and ensure that the accounts are properly balanced. Regular reconciliation of the suspense account is essential to verify the accuracy of the correction.