I'm glad you understand how departments are used midstream. That makes it easier to explain.  You are correct that you need new accounts. The best way to say that is, if all your income/expense (and your WIP) accounts have been used, and you want all of them to have departments, you will need to make new ones for each that now use departments.  If you have any that haven't been used, you can rename those accounts and now make them have departments. You then can create the departments in 1-9 and add them to ALL accounts at once by clicking Options, update accounts. If you want to split out your account between departments, you would just put the amount to one department and whatever the other amount is to the other. 

After your explanation and doing some more research I decided to play around in our software with this. 

One thing I determined is that the “department” box in the 3-5 window is simply a default. It does not automatically tie any job related entries to the department. It just prefills the box when keying an expense. Am I correct in saying that departments really become sub accounts and I will have to enter a sub account (department) for any transaction that uses these new ledger accounts?

I am assuming when running the WIP report adjustment each month it would be a lot more involved since you would need to manually sum up the over or under Billings for each department in order to determine your WIP adjustment entries. I Know there is an over/under report by job type. So we could setup every job with the same type and division and run WIP schedules by job type which would be the same thing.

The department in 3-5 is a default in that it will prefill on any AR invoice and will also prefill when creating an AP invoice with that job.  You will have to enter that department when using that ledger account because when you save, if there isn't one, you will get a message that says it's missing. It is a subaccount wherever the word says subaccount, but do realize that there are also subaccounts that are only used on liability and asset accounts.  If you are doing a large WIP adjustment and the WIP account also has departments, then adding them up will certainly help when making that adjustment.