I made this as a gift last summer. It's the same idea as in my fast and easy purse pattern, but finished a little differently.
Pattern modification:
Once you have knit the main rectangle body, sew up the side seams, but pinch in the corners and sew them as shown in my lovely, oh-so-professional diagram.
Then cast on 10 stitches and work in st stitch until you have a strip that's the length of the handle you want. Repeat.
Line the purse with felt, and finish the top edge with a felt strip or bias tape.
Firmly attach the handles.
Embellish as you see fit.
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