On a whim, I decided to turn my dog dish cloth into a little bag, like maybe for toting around a sock-in-progress.

First, using size 7 needles, I knit a second square for the back--this one was plain st st with a garter edge. Then I sewed front and back together and added a handle: Using size 6 needles, I picked up seven stitches from the left side and then knit in garter stitch until the handle was the length I wanted. I also added a button hole and a button to attach the handle on the right side:

Katie suggested the bag could also be used for carrying around doggy treats.