Part I: Income is the section on your 1040 Schedule C Form where you record everything you have made (otherwise known as your income or revenue) for the year.
For an overview of what the Schedule C Form is for, please see our blog post Schedule C: An Instruction Guide.
1: Gross receipts or sales
This is your total income from all sales made during the year.
2: Returns and allowances
This is the total of any refunded orders that you paid back to customers. A refund is any amount you have returned to the customer for defective, damaged and unwanted products. Include both full refunds and partial refunds here.
3: Subtract line 2 from line 1
This is really just a working number, used to ensure that you definitely aren't including any of your refunded amounts in your total income.
4: Cost of goods sold
This will be your Cost of Goods Sold total as calculated on the second page of the form. It's best to skip this for now and return to this box once you have the numbers you need.
5: Gross profit
Subtract your Cost of goods sold total (4) from the amount on line 3 to get your Gross Profit total.
6: Other income
This is for income not directly related to the products you sell (i.e. advertising revenue on your blog, interest on funds in business bank accounts)
7: Gross income
After adding other income (if any) on line 6 to gross profit on line 5, you'll end up with gross income.
Great work! Now that you have completed Part I: Income, move along to our next Schedule C blog post: Schedule C Guide - Part II: Expenses »