FUNCTIONS OF MONEY

Functions of Money:
Money is something that is accepted as a form of payment for products or services, or for the payment of obligations. It is a medium of exchange with a specific value by which the value of all other things can be measured, which greatly facilitates trade and allows modern economies to enjoy the benefits of the division of labor. Wealth is the value of assets minus liabilities; money is one of those assets.

1. Unit of Account/Measure of Value:

Everything in the economy is quoted in terms of money. In this way, money functions as a unit of account.
This means that money is being used as the common benchmark to designate the prices of goods throughout the economy.
Because money is standardized into specific values, it can be used to price goods and services, and allows the easy comparison of prices.
Prices provide information for consumers and producers who allocate economic resources to their most desirable uses.
Items in demand command a higher price, which induces sellers to provide more of those items.

2. Medium of Exchange
Money is a medium of exchange because it can be used to buy goods and services in an attempt to satisfy unlimited needs and wants. Buyers give up money and receive goods. Sellers give up goods and receive money.
With a generally accepted medium of exchange, trades are easier and more efficient.

3. Store of Value
Value is obtained from a good when it is consumed, when it is used to satisfy wants and needs.
Money is one way of postponing the satisfaction obtained from using or consuming goods until at a later time.
The problem with storing value in money is price changes.
If the price of commodities rises, then money becomes a less effective means of storing value.
Unfortunately, inflation prevents most of the money in existence today from serving as a pure store of value, because the money loses a significant portion of its purchasing power over time. However, if there were no inflation, then money would serve as a near-perfect store of value.
4.TIME VALUE OF MONEY
A dollar in hand today is worth more than a dollar to be received in the future because, if you had it now, you could invest that dollar and earn interest.
Of all the techniques used in finance, none is more important than the concept of time value of money, also called discounted cash flow (DCF) analysis.
Future value and present value techniques can be applied to a single cash flow (lump sum), ordinary annuities, annuities due, and uneven cash flow streams. 
When compounding occurs more frequently than once a year, the effective rate of interest is greater than the quoted rate.