Treatment of "A liability of e 500 to be created for workmen compensation" in retirement revaluation a/c:

The liability of €500 for workmen compensation needs to be accounted for in the retirement revaluation account. This liability arises due to the fact that the company is responsible for compensating its employees for any work-related injuries or accidents.

1. Understanding Retirement Revaluation Account:
The retirement revaluation account is a nominal account that is used to record the revaluation of assets and liabilities upon retirement of a partner from a partnership firm. It is created to adjust the value of assets and liabilities to their fair market value at the time of retirement.

2. Treatment of the Liability:
In order to include the liability of €500 for workmen compensation in the retirement revaluation account, the following steps need to be followed:

a. Debit the Retirement Revaluation Account:
The retirement revaluation account needs to be debited with the amount of the liability, i.e., €500. This is done to increase the value of the account and reflect the addition of the liability.

b. Credit the Workmen Compensation Account:
A separate account called the Workmen Compensation Account needs to be credited with the same amount of €500. This is done to reduce the value of the account and reflect the transfer of the liability from the retirement revaluation account.

3. Impact on Retirement Revaluation Account:
The inclusion of the liability in the retirement revaluation account will have the following impact:

a. Increase in Liability:
The retirement revaluation account will show an increase in the total liabilities of the company by €500. This is because the liability for workmen compensation is now included in the account.

b. Decrease in Capital:
As the retirement revaluation account represents the revaluation of assets and liabilities, the increase in liabilities will lead to a decrease in the capital of the company. This is because the liability reduces the overall value of the company's assets.

Conclusion:
The liability of €500 for workmen compensation needs to be accounted for in the retirement revaluation account by debiting the account and crediting a separate Workmen Compensation Account. This inclusion will increase the total liabilities of the company and decrease its capital.