You need to specify the audio source in Audacity.
Depending on your computer you may be able to record directly, but you may actually need to take the sound from your speaker/line out socket into your mic/line in socket, get a cable with 3.5mm jack on either end (make sure it is a stereo cable) - you can get them in Poundland or any computer shop.
You may also want to get an adapter so that you can plug in your speakers at the same time - try Poundland again.
Now specify whichever you have used ie. mic or line in as the source. You will also need to turn off the "playback as your record option" - hence the need for the speaker adapter!