The document describes the steps to create data flow diagrams using a lemonade stand example. It explains that the first step is to create a list of activities, then construct a context-level diagram identifying external entities and processes. Next, a level 0 diagram identifies sub-processes, and then level 1 diagrams decompose the sub-processes and identify data flows and data stores. The example shows constructing context, level 0, and multiple level 1 diagrams to map out the processes of taking customer orders, producing and storing lemonade, procuring supplies, and processing payroll for a lemonade stand.