Yes, Alisha, by hitting "accept" you are accepting the request to book. By "declining" you are declining the request to book. When someone is using "instant book" the acceptance of the booking is automatic, the host doesn't need to go through the step of accepting. If a guest inquires about a booking, you have the option to "pre-approve" them as a host. When you select this, you are giving them the right to complete the booking for the days they inquire.
I'm not sure why you would want to cancel this booking if accepted. If she wants to stay elsewhere, she will need to do the cancelling. Otherwise, she is booked for your property for the dates she requested and you approved.