When you have lost your ball, or hit a shot out of bounds, which is marked by white stakes or lines, the penalty is one stroke and distance. What this means is that you incur a one-stroke penalty and need to go back to the point from where you hit your last shot.
For example, if you hit your tee shot out of bounds, you incur a one-shot penalty, must go back to the tee, hitting your third shot. If you’re playing casual golf, not of an experience level where you keep an accurate score, or just playing casually, in the interest of time, it’s generally not such bad form to just move up the fairway and take a drop.
If you are playing by the rules however, and you believe that your ball may be lost or out of bounds, play what is called a provisional ball. A provisional ball is a shot that you hit just in case your ball may be lost or out of bounds, saving you a possible hike back to the tee or the location from where you hit your previous shot. You’ll need to announce to the group in advance that you are playing a provisional ball to make sure everyone is on the same page.
When you get to your first shot, and cannot find your ball, or find that it is out of bounds, then your provisional ball becomes the ball in play. If you find your original ball in play, then your provisional ball is now considered out of play and irrelevant. Good or bad, you’ll need to play your original ball. You never have the option to choose between a provisional and your original.
In summary, the penalty for a lost ball or a ball hit out of bounds is one stroke and distance. You’ll need to go back to the point where you hit your last shot. If you’re a beginner, or not keeping score, it’s not a bad idea to just take a drop in order to keep things moving along. To possibly save time, play a provisional ball if you believe that your original may be lost or out of bounds. If you find your original ball in play, then your provisional is obsolete and you’ve got to proceed with your original.