Once you have opted in to an On-Account Distributor, when you receive a booking, it will appear on the Diary screen in purple like other online bookings. In the resulting Customer Folio, the Product and Expense will appear under the Agent tab because payment is owed to you by the Distributor (who is the Agent in this case). Please see Online On-Account Bookings for more information.
If the customer contacts you directly asking to cancel the booking, instruct them to contact the Distributor with their request (because the Distributor is responsible for the booking and payment and any changes required.)
The Distributor will then cancel the booking. In this case, you will be able to see the cancellation within the Customer Folio, and no monies for the original booking will be owed by the Agent. The Distributor may then make a new booking, based on the Customer's requirements, or instruct the customer to place a new booking online.