Hello! Having some issues with items in our system not being set up properly and wanting some advice. I plan on making a custom field "Approval status" to go on item records and then a workflow for the approval. I'm wondering though, I don't want the item to be able to be used on any transactions prior to the approval. Any help with that part?

If you inactive the item, it shouldnt show up in the transaction. That's probably the choice to go for... You could do it form level too, because there is an item filter in the custom transaction form sublist to filter out items

You could also script/workflow something to throw an error when a non-approved item is added. Inactive is sometimes too drastic.