Someone with a young child asked this question today. If you're homeschooling, especially unschooling, how do your kids 'pass'? Here's the response I wrote:
Imagine that there was a standardized provincial daycare program, more or less compulsory, that the government started, and it laid everything out for enrolled children and their caregivers from birth. Specially trained daycare staff would take primary responsibility for toddler and preschool milestones and they'd have government-devised plans to help them organize this. They'd put children into groups by age so that they could work on the same tasks with them at the same stage. Start solid food and age 6.5 months. At 10 months, begin one-on-one play using names of body parts in speech and sign. At 19 months introduce the potty. At 21 months, taper back morning nap. And so on. Each year of the child's life would have a whole set of learning and developmental expectations. At the end of each year, the daycare staff could provide parents with a report on how closely the child had developed and learned according to those expectations. Assuming they'd lined up pretty well, they'd "pass" their year. Otherwise, remedial interventions would be begun.
Now think again about what happens in a typical home with highly involved parents. For example, in your own home, with your own child. There's no sense that your son has "passed" his first year of life. While you've probably had in mind what typical growth and development is like, you haven't felt the need to formally evaluate your son against benchmarks, create reports or transcripts, or to label him as being "in Grade Negative 5" or whatever. From the perspective of someone who isn't involved in a (thankfully hypothetical) Universal Governmental Child-Rearing Program, the idea of doing all that seems ridiculous. Babies and toddlers grow and learn. Their parents support them and provide the resources and stimulation they need to thrive. That's all there is to it.
So let's move on up to age 7, or 12, without imposing any of the conventions of Universal Government Institutional Schooling on our child. We've got a child who is growing and learning, with parents supporting him and providing the resources and stimulation he needs to thrive -- educationally and otherwise. That's all there is to it. There's absolutely no need to utilize the trappings of schooling ... like grade levels, the idea of "being in a grade", and evaluations, and 'passing' and transcripts and reports. Obviously you can do all that if you want, and some homeschooling families do so, but you'll find that many discard most or all of that stuff and enjoy the flexibility that opens up to them.