I would suggest not using 1.3 as it's a beta version - ie still in testing. Use the stable version that is 1.2.4b which is at Audacity main page

There are a number of screenshotshere
which include a shot of what it will look like when you are recording. You should be able to see the drop down box which specifies the source of what you are recording from. Experiment!

It works for me.