There are no addresses in bitcoin at all.

Addresses are something that we humans use to make it easier to share the data with each other that the wallet software needs for building transactions.

At the protocol level (in the blockchain), all that exist are inputs and outputs.  Each input is a previously spent output, and the blockchain sets the consensus on the order of the transactions.

Therefore it is possible to "track" which outputs were used as inputs when building a transaction and which new unspent outputs were created.