is this how it works?

if i eat a lot one day and go over my calorie limit will eating less the next day balance it out?

technically yes, but it's not recommended to engage in extreme compensatory behaviors. like if you over-consumed 1000 calories, to restrict 1000 calories the next day is likely to result in a binge, so that should be avoided. instead reduce your intake by 100-200 over the following days or get a bit extra exercise. it will level out, and sometimes it better to just sweep it under the rug because your metabolism benefits from a high cal day every once in a while. :)

Personally I go by the week. I'll try to aim for a 500-600 calorie deficit a day (i'm trying to lose a few pounds). But there will be one day a week where i won't count cals or will have 0 deficit. The next day i'll just try to eat healthy, but aim for a little higher deficit of 600-700 to make up for my day of not watching calories.