After you have made an engineering sketch of the system to analyze, you need to identify the system boundary. The system boundary is usually represented using a dashed line. The location of the system boundary is entirely up to you. However, be aware that what may seem to be a simple placement for the system boundary may not lead to a solution after conservation and balance laws are applied.
Once the system boundary is identified then all of the mass transfers should be obvious (e.g., pipes carrying fluids crossing the boundary). What may not be as obvious are the energy transfers that cross the system boundary. In the case of a machine with a rotating shaft (e.g., a turbine or pump), the shaft crossing the boundary represents work. Be aware of other forms of work, particularly electrical work. In addition to the work transfers, carefully identify the heat transfers that cross the boundary as well.
After the mass and energy transfers are identified, then the appropriate conservation and/or balance laws can be applied to the system identified with the boundary. All to often, students (and seasoned engineers ... yes, even professors!) tend to overlook the identification of the system boundary and flow/energy transfers. Application of the conservation and balance laws are meaningless because each term represents an interaction with the system boundary, or within the system boundary (e.g., storage terms).
Get in the habit of always identifying a system boundary and the flows/energy transfers. It may seem like mundane, time-wasting work. However, it will help you understand the problem more thoroughly and will help you when it comes time to apply the appropriate conservation and/or balance laws.