Made this bag for a friend's little sister for Christmas. The fabric was wonderful because it had a built in border around the edges. I cut what I needed (about 14" wide) and folded the top down inside itself to make the edges, sewing it like you would a sleeve. The lining is the same width but slightly shorter so that the outside can fold over it. The handles are two pieces of a white, woven cotton strap you can buy by the yard at fabric stores with a blue ribbon sewed on.
I made another one for myself with a yellow lining