Sometimes things happen and you need to Cancel an order for whatever reason.

To Cancel an order simply click Edit link on a Draft Order, or Review link on an Approved Order to bring up the order edit screen.  Then click the Cancel Order button in the upper right. 

Once an order is cancelled, if it was not marked as shipped, all committed inventory will be released and made available to sell again.  If the order was shipped and the customer returned the inventory you will need to manually adjust the inventory numbers.