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According to boundary considerations systems are divided into three categories open system, closed system and isolated system. A system which can exchange matter as well as energy with surroundings is called an open system, e.g., evaporation of water from a beaker on heating. Here, vapours of water move into the atmosphere and heat energy is absorbed from the heat source by the water molecules.
A system which may exchange energy but not matter with surroundings is called a closed system. For example, consider water boiling in a closed metallic vessel. Here, heat is being transferred from the heat source to the system and the steam so produced remains inside the vessel. Thus matter is not exchanged.
A system which can neither exchange matter nor energy with the surroundings is called an isolated system. For example, take some water in an insulated vessel and put a small piece of metallic sodium in it. An exothermic reaction takes place, but neither any matter nor energy escapes or enters into it.