diff --git a/server/src/api/controllers/Purchases/Bills.ts b/server/src/api/controllers/Purchases/Bills.ts
index e190d7d84..c119bcfce 100644
--- a/server/src/api/controllers/Purchases/Bills.ts
+++ b/server/src/api/controllers/Purchases/Bills.ts
@@ -446,7 +446,9 @@ export default class BillsController extends BaseController {
           ],
         });
       }
-      if (error.errorType === 'LOCATED_COST_ENTRIES_SHOULD_BIGGE_THAN_NEW_ENTRIES') {
+      if (
+        error.errorType === 'LOCATED_COST_ENTRIES_SHOULD_BIGGE_THAN_NEW_ENTRIES'
+      ) {
         return res.status(400).send({
           errors: [
             {
@@ -456,6 +458,18 @@ export default class BillsController extends BaseController {
           ],
         });
       }
+      if (error.errorType === 'LANDED_COST_ENTRIES_SHOULD_BE_INVENTORY_ITEMS') {
+        return res.status(400).send({
+          errors: [
+            {
+              type: 'LANDED_COST_ENTRIES_SHOULD_BE_INVENTORY_ITEMS',
+              message:
+                'Landed cost entries should be only with inventory items.',
+              code: 1600,
+            },
+          ],
+        });
+      }
     }
     next(error);
   }
diff --git a/server/src/interfaces/ItemEntry.ts b/server/src/interfaces/ItemEntry.ts
index 3cb07e4a7..348e5875d 100644
--- a/server/src/interfaces/ItemEntry.ts
+++ b/server/src/interfaces/ItemEntry.ts
@@ -25,5 +25,6 @@ export interface IItemEntry {
 
 export interface IItemEntryDTO {
   id?: number,
+  itemId: number;
   landedCost?: boolean;
 }
diff --git a/server/src/services/Entries/index.ts b/server/src/services/Entries/index.ts
index b4277dabb..482fffa5a 100644
--- a/server/src/services/Entries/index.ts
+++ b/server/src/services/Entries/index.ts
@@ -17,16 +17,16 @@ const ERRORS = {
 export default class EntriesService {
   /**
    * Validates bill entries that has allocated landed cost amount not deleted.
-   * @param {IItemEntry[]} oldBillEntries -
+   * @param {IItemEntry[]} oldCommonEntries -
    * @param {IItemEntry[]} newBillEntries -
    */
   public getLandedCostEntriesDeleted(
-    oldBillEntries: ICommonLandedCostEntry[],
-    newBillEntriesDTO: ICommonLandedCostEntryDTO[]
+    oldCommonEntries: ICommonLandedCostEntry[],
+    newCommonEntriesDTO: ICommonLandedCostEntryDTO[]
   ): ICommonLandedCostEntry[] {
-    const newBillEntriesById = transformToMap(newBillEntriesDTO, 'id');
+    const newBillEntriesById = transformToMap(newCommonEntriesDTO, 'id');
 
-    return oldBillEntries.filter((entry) => {
+    return oldCommonEntries.filter((entry) => {
       const newEntry = newBillEntriesById.get(entry.id);
 
       if (entry.allocatedCostAmount > 0 && typeof newEntry === 'undefined') {
@@ -38,16 +38,16 @@ export default class EntriesService {
 
   /**
    * Validates the bill entries that have located cost amount should not be deleted.
-   * @param {IItemEntry[]} oldBillEntries - Old bill entries.
+   * @param {IItemEntry[]} oldCommonEntries - Old bill entries.
    * @param {IItemEntryDTO[]} newBillEntries - New DTO bill entries.
    */
   public validateLandedCostEntriesNotDeleted(
-    oldBillEntries: ICommonLandedCostEntry[],
-    newBillEntriesDTO: ICommonLandedCostEntryDTO[]
+    oldCommonEntries: ICommonLandedCostEntry[],
+    newCommonEntriesDTO: ICommonLandedCostEntryDTO[]
   ): void {
     const entriesDeleted = this.getLandedCostEntriesDeleted(
-      oldBillEntries,
-      newBillEntriesDTO
+      oldCommonEntries,
+      newCommonEntriesDTO
     );
     if (entriesDeleted.length > 0) {
       throw new ServiceError(ERRORS.ENTRIES_ALLOCATED_COST_COULD_NOT_DELETED);
@@ -56,16 +56,16 @@ export default class EntriesService {
 
   /**
    * Validate allocated cost amount entries should be smaller than new entries amount.
-   * @param {IItemEntry[]} oldBillEntries - Old bill entries.
+   * @param {IItemEntry[]} oldCommonEntries - Old bill entries.
    * @param {IItemEntryDTO[]} newBillEntries - New DTO bill entries.
    */
   public validateLocatedCostEntriesSmallerThanNewEntries(
-    oldBillEntries: ICommonLandedCostEntry[],
-    newBillEntriesDTO: ICommonLandedCostEntryDTO[]
+    oldCommonEntries: ICommonLandedCostEntry[],
+    newCommonEntriesDTO: ICommonLandedCostEntryDTO[]
   ): void {
-    const oldBillEntriesById = transformToMap(oldBillEntries, 'id');
+    const oldBillEntriesById = transformToMap(oldCommonEntries, 'id');
 
-    newBillEntriesDTO.forEach((entry) => {
+    newCommonEntriesDTO.forEach((entry) => {
       const oldEntry = oldBillEntriesById.get(entry.id);
 
       if (oldEntry && oldEntry.allocatedCostAmount > entry.amount) {
diff --git a/server/src/services/Purchases/Bills.ts b/server/src/services/Purchases/Bills.ts
index 7cd4dfe34..439cdfb74 100644
--- a/server/src/services/Purchases/Bills.ts
+++ b/server/src/services/Purchases/Bills.ts
@@ -13,7 +13,7 @@ import InventoryService from 'services/Inventory/Inventory';
 import SalesInvoicesCost from 'services/Sales/SalesInvoicesCost';
 import TenancyService from 'services/Tenancy/TenancyService';
 import DynamicListingService from 'services/DynamicListing/DynamicListService';
-import { formatDateFields } from 'utils';
+import { formatDateFields, transformToMap } from 'utils';
 import {
   IBillDTO,
   IBill,
@@ -194,6 +194,36 @@ export default class BillsService
     }
   }
 
+  /**
+   * Validate transaction entries that have landed cost type should not be
+   * inventory items.
+   * @param {number} tenantId - 
+   * @param {IItemEntryDTO[]} newEntriesDTO - 
+   */
+  public async validateCostEntriesShouldBeInventoryItems(
+    tenantId: number,
+    newEntriesDTO: IItemEntryDTO[]
+  ) {
+    const { Item } = this.tenancy.models(tenantId);
+
+    const entriesItemsIds = newEntriesDTO.map((e) => e.itemId);
+    const entriesItems = await Item.query().whereIn('id', entriesItemsIds);
+
+    const entriesItemsById = transformToMap(entriesItems, 'id');
+
+    // Filter the landed cost entries that not associated with inventory item.
+    const nonInventoryHasCost = newEntriesDTO.filter((entry) => {
+      const item = entriesItemsById.get(entry.itemId);
+
+      return entry.landedCost && item.type !== 'inventory';
+    });
+    if (nonInventoryHasCost.length > 0) {
+      throw new ServiceError(
+        ERRORS.LANDED_COST_ENTRIES_SHOULD_BE_INVENTORY_ITEMS
+      );
+    }
+  }
+
   /**
    * Sets the default cost account to the bill entries.
    */
@@ -334,6 +364,10 @@ export default class BillsService
       tenantId,
       billDTO.entries
     );
+    await this.validateCostEntriesShouldBeInventoryItems(
+      tenantId,
+      billDTO.entries,
+    );
     this.logger.info('[bill] trying to create a new bill', {
       tenantId,
       billDTO,
@@ -423,7 +457,7 @@ export default class BillsService
     // Validate landed cost entries that have allocated cost could not be deleted.
     await this.entriesService.validateLandedCostEntriesNotDeleted(
       oldBill.entries,
-      billObj.entries,
+      billObj.entries
     );
     // Validate new landed cost entries should be bigger than new entries.
     await this.entriesService.validateLocatedCostEntriesSmallerThanNewEntries(
diff --git a/server/src/services/Purchases/constants.ts b/server/src/services/Purchases/constants.ts
index 251598385..be1874a86 100644
--- a/server/src/services/Purchases/constants.ts
+++ b/server/src/services/Purchases/constants.ts
@@ -12,5 +12,6 @@ export const ERRORS = {
   VENDOR_HAS_BILLS: 'VENDOR_HAS_BILLS',
   BILL_HAS_ASSOCIATED_LANDED_COSTS: 'BILL_HAS_ASSOCIATED_LANDED_COSTS',
   BILL_ENTRIES_ALLOCATED_COST_COULD_DELETED: 'BILL_ENTRIES_ALLOCATED_COST_COULD_DELETED',
-  LOCATED_COST_ENTRIES_SHOULD_BIGGE_THAN_NEW_ENTRIES: 'LOCATED_COST_ENTRIES_SHOULD_BIGGE_THAN_NEW_ENTRIES'
+  LOCATED_COST_ENTRIES_SHOULD_BIGGE_THAN_NEW_ENTRIES: 'LOCATED_COST_ENTRIES_SHOULD_BIGGE_THAN_NEW_ENTRIES',
+  LANDED_COST_ENTRIES_SHOULD_BE_INVENTORY_ITEMS: 'LANDED_COST_ENTRIES_SHOULD_BE_INVENTORY_ITEMS'
 };