I know your question is about cancellation/refund and Steve's answer is complete. If you don't mind my commenting, I do have some concerns about your listing as you have presented it.
First of all, the home is lovely and looks like a great value. Secondly, it appears that you also live here as you ask the guests to "not eat your food". How secure are your personal belongings? Do you have dedicated, locked areas to place your personal, private stuff? It seems that you leave the house and garage open to a group of up to 6 people that you do not greet and orient to the space.
$500 security deposit is not only insufficient for damage to a whole house but you don't control as Air BNB makes the decision about the claims and if someone smokes in your non-smoking house, they will NOT be fined under the Air BNB terms.