Apart from its theoretical significance, the AI must represent real-world knowledge, and produce reasoning using that. The real-world things are collections of entities in different classes. This chapter presents the representations structures for such knowledge, e.g., taxonomies and reasoning based on that. Other phenomena in real-world, that are presented are, action and change, commonsense reasoning, ontology structures for different domains, like, language, and world. The Sowa’s ontology for objects, and processes, both concrete and abstract, is explained. The situation calculus is presented in its formal details, along with worked exercises. The more prevalent real-world reasoning, like nonmonotonic and default reasoning are also treated in sufficient details, along with supporting worked exercises. This is followed, with summary of the chapter, and exhaustive list of practice exercises.