A formal description of a software system that is used as a blueprint for implementing the program. At minimum, a functional specification should precisely state the purpose (e.g., the function) of the software. Depending on the software engineering methodology used, the functional specification might also provide implementation details, such as how the project is divided into modules and how the different modules interact. In addition, a functional specification often describes the software from the user's perspective -- how the user interface appears and how a user would use the program to perform specific functions.
A functional specification is often called a functional spec, or just spec.
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