How to record damaged/donated inventory

Use the Report Sale button and mark the items as sold for $0. This will expense the items and keep your inventory balances intact.
 
For the damaged item, add a "Damaged" sales platform and for the donated items, add a "Donations" sales platform (How to add sales platforms). When you record the items as sold, you can assign them to the sales platform that explains what happened to the items.

**As an aside, you will only need to record damaged/donated inventory if you use the accrual inventory method. If you use the cash inventory method, the inventory has already been written off, so you should not claim any additional deductions/expenses for it). See here for more info on these methods: What is the difference between the cash inventory method and the accrual inventory method?