Just a few clarifications required. I am new to the game and would love someone explain to me, please

I played monthly medal in my club and doing pretty well for 28 handicapper till the last hole. The ball flew across the water, hit the rocks at the edge (these are located within the area marked hazard) and then bounced back into water. The guy I was playing with told me that I have to take a drop where the ball entered the waterzone and not in a place across the water (of course not nearer to the hole). In frustration I hit the next one also into water and finally managed a seven on a par 3! This pushed me to second place in my division.

Who is right and what does the rule book say??