To cancel a Sales Order after a Production Order has been raised, production has commenced and it is too late to cancel the units you need to Force Close the Sales Order. That will tell Zedonk that you are not delivering these products to this client.
Select the Order
Tick the box [Force Close]
[Save and Close]
The order in the list is now showing a Red tick to indicate it is a Closed Order
To report on CANCELLED ORDERS, you can create an ORDER TAG i.e CANX ORDER. When you Force Close an order, change the Order Tag, then you can filter by the tag in reports. Click here to read more about ORDER TAGS