The problems that result from attempts to define “energy conversions” in open systems are briefly reviewed and simple examples are used to illustrate the general inappropriateness of such concepts. Based on the kinetic theory of gases, a physical basis for boundary work is discussed and an unambiguous hierarchy of energy budgets for open systems is then developed. The resulting concepts of energy exchange within open systems, founded on first principles, remain consistent with those for closed systems. Within this framework thermodynamic, mechanical and boundary work remain separate and distinct physical processes. Two applications demonstrate how maintaining an explicit degree of freedom for boundary work influences the interpretation of diagnostic and theoretical results for open systems.