Most good stories start with a fundamental list of ingredients: the initial situation, conflict, complication, climax, suspense, denouement, and conclusion. Great writers sometimes shake up the recipe and add some spice.
Exposition (Initial Situation)
Something Crazy Happened on the Way to Work
Poprishchin runs into Sophie, the boss' daughter, on the way to work. He thinks he hears her dog talking to another dog about writing letters. At this stage in the plot, we find out he is infatuated with her and obsessed with his lowly rank in life and at work. He also confesses for the first time that he sometimes hears and sees things no one else can.
Rising Action (Conflict, Complication)
I Am in Love, but She Is Marrying Someone Better
Poprishchin becomes obsessed with Sophie and decides to find out more about her by stealing and reading the dogs' letters. But alas! He finds out that she's marrying someone more handsome and important, and that even the dogs make fun of a lowlife like him. This rejection seems to be what snaps the thin thread holding him to reality.
Climax (Crisis, Turning Point)
I Turn Out to Be the King of Spain
Propishchin reads in the paper that Spain doesn't have a king because there's no male heir to the throne. After endlessly obsessing about it, he suddenly realizes that he himself is the king of Spain. He stops going to work. Declaring you're the king and signing your work papers as "Ferdinand VIII" makes for quite the climax, doesn't it?
Falling Action
The Confusing Place Called Spain, By Which I Mean China
Poprishchin apparently ends up in the loony bin, where he gets regularly beaten and tortured. He believes that he's been escorted to Spain, which he concludes is the same place as China. That's a bit of a let down for both him and us after that glorious climax.
Resolution (Denouement)
Save Me Mommy
Poprishchin might not think he's in the insane asylum, but he knows that wherever he is, it's a horrible place to be. The only thing left to do at this point is to cry for mommy to come save him. But he ends his diary with a completely crazy comment about the Dey of Algiers, which makes us wonder whether mommy, or anyone else for that matter, can save him from his madness.