Answer:
The system is a portion of the universe that you separate to study it. It doesn't have to be a physical separation, you determine the boundaries of the system or a given problem has them determined. A machine, a rock, a room or a person can be defined as a system.
The surrounding is the rest of the universe that is not part of the system. So system + surrounding = universe.
Any products of the system are ouputs, these leave the system and are no longer part of it, therefore they are part of the surrounding.