At impact, most of the kinetic energy is transferred to elastic energy in the ball (by its deformation) and not to the floor. Some energy is also converted to other forms like heat and sound. These other forms of energy, are mostly losses and they are not recovered thus making the ball bounce back to a lower height.Jun 6, 2014 read more
Actually the ball does not bounced back to the original height from which it was dropped. You are right by saying it has to do with the loss of potential energy. When the ball is still at its original height it possesses gravitational potential energy. As it moves down, it losses some of the gravitational potential energy and gains kinetic energy. read more
This energy is not recovered when the ball takes back its original shape. As Jim notes, another loss is due to friction with air: although this is generally small for a ball heavy enough, this would still prevent bouncing back to the same height. read more
As a result, the ball cannot reach its original height, which means it has less potential energy than it had before its initial drop. The difference between the original height and the height attained by any subsequent bounces represents the net loss of energy to entropy at that point. read more