A novel computational approach that takes into account knock-on e-beam effects of the deformation of sample structure during imaging in high resolution transmission electron microscopy (HRTEM) is presented. The proposed approach has been implemented in the in-house software CompuTEM in which the evolution of the sample structure is described as a sequence of externally initiated discrete damage events with a frequency determined by the cross section, which depends on the energy of the electron beam. A series of images showing structure evolution with time is obtained by coupling molecular dynamics with the image simulation. These simulation parts are linked by two experimental parameters: the energy of the electron beam and the electron dose rate. CompuTEM is used to simulate the recently observed in HRTEM process of structural transformation of a graphene flake into a fullerene cage by HRTEM. The simulated series of images showing the evolution of a graphene flake under the 80 keY electron beam closely reproduces experimental HRTEM images with regard to the structure transformation route, transformation rate, and signalto- noise ratio. The structure transformation process is found to depend on the position and subsequent behaviour of the vacancy created by the electron beam during sample imaging. The stability and dynamics of a monovacancy in graphene flakes is studied by means of density functional theory and molecular dynamics techniques. The obtained results explain the mechanisms driving structural transformations in graphene.