Manav,
As I said this is a call for the accountants, not for consultants. Auditors will go after the accountants if something goes wrong with numbers.
I would put the two options in front of the accounting group and would let them decide.
Personally, if I am the budget control I would choose option 1. No other system should hit trade liability account than AP. This keeps the reconciliation clean between AP and GL.
On the side note, whether accounting has reached GL or not, would not really affect the choice between A and B.
Hasan