Someone asked about how to assess children without using flashcards or tests. (See here for the original article about the book.) I thought the question deserved more than a one sentence answer. There is one widely used method of assessing young children in context called authentic assessment, which uses functional tasks to learn what the child does and does not know.
Authentic assessment is a process of discovering what a child knows in the context of day-to-day life. Do you need to know how far the child can correctly count? Have him count the chocolate chips that go into the cookie batter. What about letter names? Read a book together, and occasionally ask, "What is that letter?" (Do not make the young child think that you are testing him, just that you are asking a question.) If you are a teacher or home-schooler, keep detailed notes and observations about what you have seen the child do and skills that you have elicited from the child. (The Power of Observation by Judy R. Jablon, Amy Laura Dombro, & Margo L. Dichtelmiller is a nice introduction to observing children's skills.) Also, it may be helpful to keep in mind how much scaffolding, or adult help, your child needed from you to complete the task. As he better grasps a skill, he will need less scaffolding.
If you do not feel qualified to simply observe what your child is doing, there are also checklists of skills available to measure growth. Checklists still require you to watch the child for skills that occur in a functional environment, not just when you are "testing" the child, but they give some guidance about what a child ought to be doing at what age. One checklist that my workplace frequently uses is the DAYC, or Developmental Assessment of Young Children. This link leads to a pdf with an example of the DAYC at the end. Please remember, though, that if your child is not doing everything is his or her age category, that does not mean that he or she is behind!! There is a lot of natural variation in when children learn skills!
As the child grows, using authentic assessment will become more difficult, and eventually she will need to take traditional tests (e.g. the SAT or ACT). The teacher or homeschooler should definitely prepare the child for such tests by practicing similar skills, such as multiple choice and essay exams, but these skills can wait at least until formal schooling begins.
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