An obligation is officially recognized only when recorded: True or False?

• A. True
• B. Sometimes
• C. False
• D. Not applicable

Answer: (C)

An obligation is created as soon as there is a binding procurement action that legally commits the government to pay in the future—such as a signed contract or a issued purchase order. This creates a legal liability, even before any accounting entry is made. Recording the obligation is the act of documenting and tracking that liability in the financial system, but the obligation itself exists at the moment the contract or order is established. Therefore, the statement that an obligation is officially recognized only when recorded is not correct.