Concepts are mental representations that serve as the foundation for correct reasoning. They are formed through a five-step process. The first step, presentation, involves the introduction of the material from which the concept will be formed. For instance, to form the concept of an animal, one must first perceive various kinds of animals. The second step, comparison, involves distinguishing the points of resemblance and difference between various animals.

The third step, abstraction, involves separating the qualities of the object and considering them in detail. The fourth step, generalization, involves creating a general idea or concept regarding the object by combining the various qualities discerned through comparison and analysis. The final step, denomination, involves giving a name to the concept.

Concepts are the raw material that feeds the machinery of reasoning, leading to the production of perfected thought. For example, a child's concept of a horse is simpler than that of an experienced adult. As we advance in experience and knowledge, the web of related objects and ideas becomes more intricate and complex. The more knowledge one possesses of the facts and objects of the outside world, the better able they are to reason from them. Thus, concepts are crucial in the process of reasoning and the production of thought.