It is important for both students and professionals to have a basic knowledge of proper grammar. This is needed not only for exams that specifically test the subject, but also for obtaining a higher-level job that involves any type of business writing. Determining when you should use "its" versus "it's" in a sentence is easy once you understand that "it's" refers to "it is."
Step 1
Determine if the sentence could be rewritten to include the words "it is." An example would be, "It is Lisa who stole my heart." If you want to use an abbreviation for "it is," you can use "it's." Just remember that "it's" is nothing other than a contraction for "it is." That is the only way that it should be used, except on occasion when it is used as a contraction for "it has" (the past tense). Still, it is always a contraction. An example of the latter would be, "It's been two whole days since Lisa kissed me."
Step 2
Determine if the sentence involves any type of possessing. For example, you can correctly say, "The bird flew back to its nest." The nest belongs to the bird, so use "its." It would be totally wrong to use "it's," since the sentence would then really read, "The bird flew back to it is nest."
Step 3
See if you can use a pronoun to reflect possession without having to use "its." Instead of, "The dog buried its bone," change it to "The dog buried his bone" or "her bone." You know that "his" or "her" do not have an apostrophe, so neither should "its" in the same context. The word "its" does not get an apostrophe, because if it did, it would mean "it is" or "it has." However, it is correct to say, "Lisa buried her dog's bone." You use the apostrophe-S to show that the bone belongs to the dog.