but you must also add 1 to the inverted bits. you do that with this adder/subtractor by coupling in the same 1 that goes to the XORs (the add/subtract signal where add=0 and subtract=1) to the carry-in of the LSB (which is tied to 0 if you're adding).
no, just put in for A the bit pattern for -5, which is the same bit pattern for an unsigned 4-bit number that is 16-5 or 11. so -5 is 1011 and you subtact 3 (0011) which gets complimented to 1100 and goes into your full-adder, but then you gotta remember to couple in the 1 into the carry-in of the LSB (which effectively adds 1).
1011 + 1100 + 0001 = 1000
or -8 since the 1 that carries out falls off the edge.