The department that you can specify on the Location code is used for Shipment transactions only within IC and no other transaction type. Of course, the account that is posted to with the 'new' department also has to exist.

This also applied to invoices and credit notes posted from Adagio Order Entry. Both IC Shipments and OE Invoices may be identified for GL accounts/departments in the IC Transaction History report.

Which transactions were you posting while checking out the GL Department code from the location? With the current version of Adagio Inventory (IC68B, 031107), all of this is working fine.