Does cancelling an order put the items back in stock?

Yes. When you change an order to Cancelled and click Update Status, Wcart puts back any stock that was reserved for it, so the items can be sold again.

Cancelling also undoes the other things the order used:

• A coupon used on it is released, so its usage limits count it as unused
• Wallet money used on it goes back to the customer's wallet
• Reward points earned are taken back and points spent are returned
• Affiliate commission is reversed, unless it was already paid out

You'll see the change in the order's Timeline. Money paid online or by card is not refunded automatically. Refund that through your payment provider.