Final answer:
Principal repayment is not recorded in accounting for debt investments; instead, interest income, fair value adjustment, and impairment loss are recorded as entries to reflect the performance and value of the investment over time.
Step-by-step explanation:
In accounting for debt investments, entries are made for a variety of events, but principal repayment is not typically recorded as an entry. When you purchase debt investments, you record the acquisition cost and subsequently you must account for interest income as it accrues, recognizing revenue as you have the right to receive it. If the fair value of the investment changes, you would adjust through fair value adjustment entries if applicable, this depends on whether the investments are classified at fair value through profit or loss, or available for sale. An impairment loss would be recorded if the investment's recoverable amount falls below its carrying amount on the balance sheet. However, principal repayment is not recorded because it is not a revenue or expense, it is simply the return of the investment's cost which was initially recorded as the purchase price of the debt security.