diff --git a/erpnext/accounts/party.py b/erpnext/accounts/party.py
index 477573554f0..452632fb6d4 100644
--- a/erpnext/accounts/party.py
+++ b/erpnext/accounts/party.py
@@ -777,7 +777,11 @@ def validate_account_party_type(self):
 
 	if self.party_type and self.party:
 		account_type = frappe.get_cached_value("Account", self.account, "account_type")
-		if account_type and (account_type not in ["Receivable", "Payable"]):
+		if (
+			account_type
+			and (account_type not in ["Receivable", "Payable", "Equity"])
+			and self.party_type != "Shareholder"
+		):
 			frappe.throw(
 				_(
 					"Party Type and Party can only be set for Receivable / Payable account<br><br>" "{0}"