Re: That's OK or It's OK
GoodDay, welcome to Using English.
Please note it's "okay" not "okey."
It's okay -- used to refer to a thing to say it's acceptable. Not great, not terrible.
That's okay - used to refer to a situation that is not causing you trouble.
How do you like the play so far?
How do you like your new job?
I'm sorry I forgot your birthday (The act of forgetting was a situation)
I've set up your meeting with Bill for Tuesday. Is that okay?
Yes, that's okay. Great, actually. That gives me time to prepare.
I'm not a teacher, but I write for a living. Please don't ask me about 2nd conditionals, but I'm a safe bet for what reads well in (American) English.