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Hi everyone, we understand why people would want to be able to apply a credit note within a locked period however we wanted to provide more context on the purpose of lock dates and reasons for the way they work at present.

Basically put lock dates prevent users making changes to the accounting records prior to the lock date. Their role is to prevent unintended changes which would alter reporting outcomes be they financial reports, VAT/GST/Sales Tax reports etc. Lock dates ensure financial data is accurate and trustworthy.

When a credit note is allocated to an invoice the allocation date is dated the later of the two documents, the first day where both exist. Credit note allocations require creating journals on both a cash and accrual basis, which is why if both the invoice and the credit note are in a locked period, the allocation can’t be done. Those journals can change important reports like the Balance Sheet and the P&L(Income Statement), as well as impacting your local sales tax.

So to be clear

• An invoice in a locked period can be settled with a credit note which is not dated in the locked period because we are able to build the correct journals on the date of the credit note
• A credit note in a locked period can be allocated to an invoice which is not dated in the locked period because we are able to build the correct journals on the date of the invoice
• If both credit note and invoice exist in the locked period then they can’t be allocated against each other because we can’t build journals in the locked period

Xero prompts you to allocate credit as soon as there is both credit and something which it could be allocated to. If you skip that prompt and have both documents entered but unallocated before you locked the period, then to allocate them you need to allow new journals to be created in that period, meaning you will need to unlock the period.

Lock dates provide a lot of security and comfort for people who set them once they've filed with tax authorities, ensuring that neither deliberate nor unintended changes end up altering their tax position and making them no longer compliant. We therefore have no plans to change how lock dates work.