If you plan to sell products on eBay, setting up a Paypal account will give you a marked advantage. Many eBay buyers look for the Paypal logo when they browse auctions, and many of those buyers are reluctant to purchase from sellers who do not accept Paypal. Fortunately, Paypal is easy to use, and the payment service also makes it easy to refund payments in the event an order is canceled or a return is permitted.
Instructions:
Cancel as a Seller:
1) Log on to your Paypal account and go to the "My Account" section of the page. Click on the "History" tab.
2) Look for the payment you wish to cancel and click "Cancel" in the "Order Status/Actions" column. Click "Cancel Payment" to cancel the payment.
3) Send a personal email to the buyer to inform him of the canceled payment. Paypal will automatically send an email to the buyer, but it is good business practice to communicate directly with your customers.
Cancel as a Buyer:
1) Log on to your Paypal account and click the "History" tab. This will give you a list of your recent transactions.
2) Look for the order you wish to cancel. Once you have found the order, click on the "Cancel" button to cancel the order.
3) Click "Cancel Payment" to confirm the cancellation. Go back to the "History" tab and make sure the order has been canceled.
Source - eHow
