Gross receipts, Line 1, is the money that you make. COGS starts with beginning inventory, adds purchases and other costs and subtracts ending inventory from that amount. The resultant figure is your cost.
Your cost is subtracted from your gross receipts to give you gross profit, Line 5. You may have income from sources not related to your business per se, such as an amount from a bank for opening an account. That is added to gross profit to give you Line 7, gross income.
Your expenses are deducted from that amount to give you net profit or loss.
