How do children make relation between a toy and real life representation of the toy ?

It's a natural part of understanding and recognition. Brains work by identifying common features and clifying them. For example, if presented with lots of fruit, a child will notice that some are orange and bumpy and soft, others are green, shiny, and hard. People will be identified as having arms, being taller than they are wide, etc. When they see a doll that has arms, legs, red curly hair, and wears a blue dress, it's automatic to identify that with with a mother who shares the same qualities. At least once it's understood that the doll itself is just a doll. There probably is an abstract thought ability that helps with that part. As far as I know, that's simply a function of extra raw reasoning/intelligence as the child develops.