Yes, this works, change either needs to be sent back to Address A, if the amount is less, or an additional previous transaction output needs to be used if the amount is greater than what was sent from Address1. Here is an illustration of change.

Let's say 1 BTC is sent from Address A to Address B. Then 0.5 BTC is sent from B back to A.

TX #1

Input                         | Output
----------------------------- | ------
(some output 1 BTC to A)      | 1 BTC to B

TX #2

Input                         | Output
----------------------------- | ------
(TX #1 output 1 BTC A to B)   | 0.5 BTC to A
                              | 0.5 BTC to B (change)

• Note this doesn't account for tx fees, which would decrease the change amount back to A