All you do is show your End-of-Year Inventory balance as $0. That's basically it for inventory. Since the lost stock was not sold, you'll have no income to report for that lost stock, since you didn't sell them. However (Yes, there's always a "but")
If you received an insurance payout for that lost inventory, then you effectively sold that inventory to the insurance company. So the payout would be reported as income to the business.
