Turn the bag inside out to show it is apparently nothing but an empty bag. Drop object to be vanished or changed into the bag. Tighten draw strings for effect, say your words of magic, and open bag to a different compartment to show that the object has either vanished or changed to something else. Turn the bag inside out to show it is empty. Then you can put something into this empty compartment and either vanish it or turn it into something different than what was in the first compartment.