Let me share some photos and then I will share how I did it..........
I followed the tutorial at http://ohsohappytogether.blogspot.com/2009/08/todays-tutorial-rag-bag.html I did change a few things though.
I used a loose weave basket type purse, I added the rag strips all over the purse not just on one side, and I made a cut fabric flower that I hot glued on one side. I found the basket weave purse at goodwill and just used fabric scraps that I had on hand. It cost me less than $5!!!
Very easy and so fun!!