<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                        Commission File Number: 33-69996

                      COMMONWEALTH INCOME & GROWTH FUND II
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

         Pennsylvania                                     23-2795120
-------------------------------                     ----------------------
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                      Identification Number)

                          470 John Young Way Suite 300
                                 Exton, PA 19341
          -------------------------------------------------------------
          (Address, including zip code, of principal executive offices)

                                 (610) 594-9600
               ---------------------------------------------------
               (Registrant's telephone number including area code)

         Indicate by check mark whether the registrant (i) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (ii) has been subject to such filing
requirements for the past 90 days:


                   YES  [X]                            NO   [ ]



<PAGE>

                      Commonwealth Income & Growth Fund II
                                 Balance Sheets

<TABLE>
<CAPTION>
                                                                   March 31         December 31,
                                                                     2002               2001
                                                              --------------------------------------
                                                                  (unaudited)
Assets
<S>                                                                  <C>               <C>
Cash and cash equivalents                                            $     56,375      $     14,425
Lease income receivable, net of allowance for doubtful
     accounts reserve of $77,000 as of March 31, 2002 and
     $54,200 as of December 31, 2001                                      484,124           488,472
Accounts Receivables - Commonwealth Capital Corp                          324,727           315,404
Accounts Receivables - affiliated limited partnerships                      3,138             2,761
Prepaid Fees                                                                6,200             3,200
                                                              --------------------------------------
                                                                          874,564           824,262
                                                              --------------------------------------

Computer equipment, at cost                                            10,501,346        11,656,085
Accumulated depreciation                                               (7,024,603)       (7,769,975)
                                                              --------------------------------------
                                                                        3,476,743         3,886,110
                                                              --------------------------------------

Equipment acquisition costs and deferred expenses, net                    137,914           148,988
                                                              --------------------------------------


Total assets                                                          $ 4,489,221       $ 4,859,360
                                                              ======================================

Liabilities and Partners' Capital

Liabilities
Accounts payable                                                       $   70,623       $    40,472
Accounts payable - General Partner                                         14,569            55,675
Unearned lease income                                                      87,526            75,930
Notes payable                                                           2,264,245         2,380,383
                                                              --------------------------------------
Total liabilities                                                       2,436,963         2,552,460
                                                              --------------------------------------

Partners' Capital
General partner                                                             1,000             1,000
Limited partners                                                        2,051,258         2,305,900

                                                              --------------------------------------
Total partners' capital                                                 2,052,258         2,306,900
                                                              --------------------------------------

Total liabilities and partners' capital                               $ 4,489,221       $ 4,859,360
                                                              ======================================
</TABLE>

                 see accompanying notes to financial statements

<PAGE>

                             Commonwealth Income & Growth Fund II
                                     Statements of Income

<TABLE>
<CAPTION>
                                                                   Three Months Ended
                                                                        March 31
                                                                 2002              2001
                                                           ------------------------------------
                                                                       (unaudited)
Income
<S>                                                           <C>               <C>
Lease                                                         $ 703,247         $ 830,199

Interest and other                                                  470             2,009

Gain on sale of computer equipment                                1,842                --
                                                           ------------------------------------


Total Income                                                    705,559           832,208
                                                           ------------------------------------

Expenses

Operating, excluding depreciation                               110,141            94,550

Equipment management fee - General Partner                       35,162            41,510

Interest                                                         39,068            30,772

Depreciation                                                    522,338           743,770

Amortization of equipment
  acquisition costs and deferred expenses                        21,751            28,290

Bad Debt Expense                                                 54,417                --

Loss on sale of computer equipment                                   --            23,245
                                                           ------------------------------------

Total expenses                                                  782,877           962,137
                                                           ------------------------------------


Net (loss)                                                    $ (77,318)        $(129,929)
                                                           ====================================

Net (loss) per equivalent limited
  partnership unit                                            $   (0.17)        $   (0.28)
                                                           ====================================

Weighted Average number of equivalent limited
  partnership units outstanding during the period               460,306           461,817
                                                           ====================================
</TABLE>

                 see accompanying notes to financial statements


<PAGE>
                      Commonwealth Income & Growth Fund II
                         Statements of Partners' Capital

<TABLE>
<CAPTION>
                                                                       For the Three Months ended March 31, 2002
                                                                                      (unaudited)

                                                General          Limited
                                                Partner          Partner            General           Limited
                                                 Units            Units             Partner           Partner           Total
                                            ----------------------------------------------------------------------------------------
<S>                                                 <C>          <C>               <C>             <C>                <C>
Partners' capital - December 31, 2001               50           460,567           $ 1,000         $ 2,305,900        $2,306,900
  Net income (loss)                                                                  1,732             (79,050)          (77,318)
  Redemption                                                        (500)               --              (4,164)           (4,164)
  Distributions                                                                     (1,732)           (171,428)         (173,160)
                                            ----------------------------------------------------------------------------------------
Partners' capital - March 31, 2002                  50           460,067           $ 1,000         $ 2,051,258        $2,052,258
                                            ========================================================================================
</TABLE>


                 see accompanying notes to financial statements


<PAGE>

                      Commonwealth Income & Growth Fund II
                             Statements of Cash Flow
               For the Three Months Ended March 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                                   2002              2001
                                                            -------------------------------------
Operating activities                                                    (unaudited)
<S>                                                            <C>               <C>
Net (loss)                                                     $   (77,318)      $  (129,929)
Adjustments to reconcile net (loss) to net cash
   provided by operating activities
     Depreciation and amortization                                 544,089           772,060
     Allowane for doubtful accounts                                 22,800
     (Gain) loss on sale of computer equipment                      (1,842)           23,245
     Other noncash activities included in
          determination of net income                             (306,557)         (404,450)
     Changes in assets and liabilities
     (Increase) decrease in assets
              Lease income receivable                              (18,452)          138,037
              Other receivable, General Partner                         --           (13,752)
              Other receivable, affiliated partnerships               (377)           (4,329)
              Prepaid fees                                          (3,000)               --
     Increase (decrease) in liabilities
              Accounts payable                                      30,151             4,354
              Accounts payable, Common Capital Corp.                    --               (62)
              Accounts payable, General Partner                    (41,106)               --
              Unearned lease income                                 11,596                --
                                                            -------------------------------------

Net cash provided by operating activities                          159,984           385,174
                                                            -------------------------------------

Investing activities:
Capital Expenditures                                               (28,906)         (118,628)
Net proceeds from the sale of computer equipment                   108,196            13,388
Equipment acquisition fees paid to General Partner                  (8,773)           (4,745)
                                                            -------------------------------------

Net cash provided by (used in) investing activities                 70,517          (109,985)
                                                            -------------------------------------

Financing activities:
Distributions to partners                                         (173,160)         (231,128)
Redemption of limited partners                                      (4,164)               --
Other receivables-Commonwealth Capital Corp                         (9,323)         (171,621)
Debt Placement fee paid to the General Partner                      (1,904)               --
                                                            -------------------------------------

Net cash (used in) financing activities                           (188,551)         (402,749)
                                                            -------------------------------------

Net increase (decrease) in cash and equivalents                     41,950          (127,560)
Cash and cash equivalents, beginning of period                      14,425           277,719
                                                            -------------------------------------

Cash and cash equivalents, end of period                        $   56,375       $   150,159
                                                            =====================================
</TABLE>

                 see accompanying notes to financial statements


<PAGE>

                          NOTES TO FINANCIAL STATEMENTS

1.       Business          Commonwealth Income & Growth Fund II (the
                           "Partnership") is a limited partnership organized in
                           the Commonwealth of Pennsylvania to acquire, own and
                           lease various types of computer peripheral equipment
                           and other similar capital equipment, which will be
                           leased primarily to U.S. corporations and
                           institutions. Commonwealth Capital Corp, on behalf of
                           the Partnership and other affiliated partnerships,
                           acquires computer equipment subject to associated
                           debt obligations and lease revenue and allocates a
                           participation in the cost, debt and lease revenue to
                           the various partnerships based on certain risk
                           factors. The Partnership's General Partner is
                           Commonwealth Income & Growth Fund, Inc. (the "General
                           Partner"), a Pennsylvania corporation which is an
                           indirect wholly owned subsidiary of Commonwealth
                           Capital Corp. Approximately ten years after the
                           commencement of operations, the Partnership intends
                           to sell or otherwise dispose of all of its computer
                           equipment, make final distributions to partners, and
                           to dissolve. Unless sooner terminated, the
                           Partnership will continue until December 31, 2006.

2.      Summary of         Basis of Presentation
        Significant
        Accounting         The financial information presented as of any date
        Policies           other than December 31 has been prepared from the
                           books and records without audit. Financial
                           information as of December 31 has been derived from
                           the audited financial statements of Commonwealth
                           Income & Growth Fund II (the "Partnership"), but does
                           not include all disclosures required by generally
                           accepted accounting principles. In the opinion of
                           management, all adjustments, consisting only of
                           normal recurring adjustments, necessary for a fair
                           presentation of the financial information for the
                           periods indicated have been included. For further
                           information regarding the Partnership's accounting
                           policies, refer to the financial statements and
                           related notes included in the Partnership's annual
                           report on Form 10-K for the year ended December 31,
                           2001. Operating results for the three-month period
                           ended March 31, 2002 are not necessarily indicative
                           of financial results that may be expected for the
                           full year ended December 31, 2002.


                           Revenue Recognition

                           Through March 31, 2002, the Partnership has only
                           entered into operating leases. Lease revenue is
                           recognized on a monthly basis in accordance with the
                           terms of the operating lease agreements.
<PAGE>

                           Use of Estimates

                           The preparation of financial statements in conformity
                           with generally accepted accounting principles
                           requires management to make estimates and assumptions
                           that affect the reported amounts of assets and
                           liabilities and disclosure of contingent assets and
                           liabilities at the date of the financial statements
                           and the reported amounts of revenues and expenses
                           during the reporting period. Actual results could
                           differ from those estimates.

                           Long-Lived Assets

                           The Partnership evaluates its long-lived assets when
                           events or circumstances indicate that the value of
                           the asset may not be recoverable. The Partnership
                           determines whether an impairment exists by estimating
                           the undiscounted cash flows to be generated by each
                           asset. If the estimated undiscounted cash flows are
                           less than the carrying value of the asset then an
                           impairment exists. The amount of the impairment is
                           determined based on the difference between the
                           carrying value and the fair value. The fair value is
                           determined based on estimated discounted cash flows
                           to be generated by the asset. As of March 31, 2002,
                           there is no impairment.

                           Depreciation on computer equipment for financial
                           statement purposes is based on the straight-line
                           method over estimated useful lives of four years.

                           Intangible Assets

                           Equipment acquisition costs and deferred expenses are
                           amortized on a straight-line basis over two- to-four
                           year lives. Unamortized acquisition fees are charged
                           to amortization expense when the associated leased
                           equipment is sold.

                           Cash and Cash Equivalents

                           The Company considers all highly liquid investments
                           with a maturity of three months or less to be cash
                           equivalents. At March 31, 2002, cash equivalents were
                           invested in a money market fund investing directly in
                           Treasury obligations.

                           Income Taxes

                           The Partnership is not subject to federal income
                           taxes; instead, any taxable income (loss) is passed
                           through to the partners and included on their
                           respective income tax returns.

                           Taxable income differs from financial statement net
                           income as a result of reporting certain income and
                           expense items for tax purposes in periods other than
                           those used for financial statement purposes,
                           principally relating to depreciation, amortization,
                           and lease income.


<PAGE>

                           Offering Costs

                           Offering costs are payments for selling commissions,
                           dealer manager fees, professional fees and other
                           offering expenses relating to the syndication.
                           Selling commissions are 7% of the partners'
                           contributed capital and dealer manager fees are 2% of
                           the partners' contributed capital. These costs have
                           been deducted from partnership capital in the
                           accompanying financial statements.

                           Net Income (Loss) Per Equivalent Limited Partnership
                           Unit

                           The net income (loss) per equivalent limited
                           partnership unit is computed based upon net income
                           (loss) allocated to the limited partners and the
                           weighted average number of equivalent units
                           outstanding during the period.

3.      Computer           The Partnership is the lessor of equipment under
        Equipment          operating leases with periods ranging from 24 to 37
                           months. In general, the lessee pays associated costs
                           such as repairs and maintenance, insurance and
                           property taxes.

                           The Partnership's share of the computer equipment in
                           which they participate at March 31, 2002 and December
                           31, 2001 was approximately $3,067,000 and $2,969,000,
                           respectively, which is included in the Partnership's
                           fixed assets on their balance sheet, and the total
                           cost of the equipment shared by the Partnership with
                           other partnerships at March 31, 2002 and December 31,
                           2001 was approximately $5,667,000 and $5,526,000,
                           respectively. The Partnership's share of the
                           outstanding debt associated with this equipment at
                           March 31, 2002 and December 31, 2001 was
                           approximately $1,464,000 and $1,581,000,
                           respectively, which is included in the Partnership's
                           liabilities on the balance sheet, and the total
                           outstanding debt at March 31, 2002 and December 31,
                           2001 related to the equipment shared by the
                           Partnership was approximately $4,775,000 and
                           $4,895,000, respectively.

                           The following is a schedule of future minimum rentals
                           on noncancellable operating leases at March 31, 2002:

                                                                         Amount
                           ----------------------------------------------------
                           Nine Months ended December 31, 2002       $1,026,000
                           Year Ended December 31, 2003               1,177,000
                           Year Ended December 31, 2004                 688,000
                           ----------------------------------------------------

                                                                     $2,891,000
                           ====================================================


<PAGE>

4.      Related Party      Other Receivables
        Transactions
                           At March 31, 2002, the Partnership has a receivable
                           from Commonwealth Capital Corp ("CCC"), a related
                           party to the Partnership, in the amount of
                           approximately $325,000. CCC, thru its indirect
                           subsidiaries, including the General Partner of the
                           Partnership, earns fees based on revenues and new
                           lease purchases from this fund and other funds. This
                           is a non-interest bearing receivable that CCC plans
                           to repay over the next three fiscal years from
                           acquisition and debt placement fees earned by the
                           General Partner of the Partnership.

5.      Notes Payable      Notes payable consisted of the following:

<TABLE>
<CAPTION>
                                                                               March 31,   December 31,
                                                                                 2002         2001
                           -----------------------------------------------------------------------------
<S>                                              <C>                         <C>            <C>
                           Installment notes payable to banks; interest
                           ranging from 8.5% to 9.18%, due in monthly
                           installments ranging from $152 to $2,578,
                           including interest, with final payments due from
                           July through November 2002.                       $  18,868      $   81,833

                           Installment notes payable to banks; interest
                           ranging from 7.75% to 9.75%, due in monthly
                           installments ranging from $72 to $5,975,
                           including interest, with final payments due from
                           February through December 2003.                     444,568         490,762

                           Installment notes payable to banks; interest
                           ranging from 6.50% to 8.75%, due in monthly
                           installments ranging from $96 to $22,799,
                           including interest, with final payments due from
                           February through December 2004.                   1,800,809       1,807,788
                                                                            ----------------------------
                                                                            $2,264,245      $2,380,383
                           =============================================================================
</TABLE>

                               These notes are secured by specific computer
                               equipment and are nonrecourse liabilities of
                               the Partnership. Aggregate maturities of
                               notes payable for each of the periods
                               subsequent to March 31, 2002 are as follows:

                                                                          Amount
                            ----------------------------------------------------
                               Nine months ended December 31, 2002      $785,794
                               Year ended December 31, 2003              957,591
                               Year ended December 31, 2004              520,860
                                                                    ------------
                                                                      $2,264,245
                                                                    ============
<PAGE>

6.      Supplemental       Other noncash activities included in the
        Cash Flow          determination of net loss are as follows:
        Information

Three months ended March 31,                      2002               2001
--------------------------------------------------------------------------------

Lease income, net of interest expense on
  notes payable realized as a result of
  direct payment of principal by lessee
  to bank
                                                $306,577           $404,450

     No interest or principal on notes payable was paid by the Partnership
     because direct payment was made by lessee to the bank in lieu of
     collection of lease income and payment of interest and principal by
     the Partnership.

         Noncash investing and financing activities include the following:

Three months ended March 31,                      2002               2001
--------------------------------------------------------------------------------

Debt assumed in connection with purchase
  of computer equipment                         $190,419           $     --
--------------------------------------------------------------------------------

7.      Litigation         The Partnership, through Commonwealth Capital Corp,
                           has initiated a lawsuit against a customer for
                           failure to make monthly lease payments on the
                           existing terms. Management believes that the
                           Partnership will prevail in this matter; the outcome
                           of this uncertainty will not have a material adverse
                           impact to the financial statements of the
                           Partnership. The monthly rental that we are
                           continuing to record is approximately $37,000 per
                           month. The current outstanding receivable is
                           approximately $417,000.

Item 2:  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

CRITICAL ACCOUNTING POLICIES

Financial Reporting Release No. 60, which was released by the Securities and
Exchange Commission, requires all companies to include a discussion of critical
accounting policies or methods used in the preparation of financial statements.
Our significant accounting policies are described in Note 1 of the Notes to the
Consolidated Financial Statements. The significant accounting policies that we
believe are the most critical to aid in fully understanding our reported
financial results include the following:


<PAGE>

COMPUTER EQUIPMENT

Commonwealth Capital Corp, on behalf of the Partnership and other affiliated
partnerships, acquires computer equipment subject to associated debt obligations
and lease revenue and allocates a participation in the cost, debt and lease
revenue to the various partnerships based on certain risk factors.

REVENUE RECOGNITION

Through March 31, 2002, the Partnership has only entered into operating leases.
Lease revenue is recognized on a monthly basis in accordance with the terms of
the operating lease agreements.

LONG-LIVED ASSETS

The Partnership evaluates its long-lived assets when events or circumstances
indicate that the value of the asset may not be recoverable. The Partnership
determines whether an impairment exists by estimating the undiscounted cash
flows to be generated by each asset. If the estimated undiscounted cash flows
are less than the carrying value of the asset then an impairment exists. The
amount of the impairment is determined based on the difference between the
carrying value and the fair value. Fair value is determined based on estimated
discounted cash flows to be generated by the asset. Depreciation on computer
equipment for financial statement purposes is based on the straight-line method
over estimated useful lives of four years.

Liquidity and Capital Resources

The Partnership's primary sources of capital for the three months ended March
31, 2002 and 2001 were from cash from operations of $160,000 and $385,000,
respectively, and gross proceeds received from sale of equipment totaling
$108,000 for the period ending March 31, 2002 and $13,000 for the period ending
March 31, 2001. The primary use of cash for the three months ended March 31,
2002 and 2001, was for capital expenditures for new equipment totaling $29,000
and $119,000, and the payment of preferred distributions to partners for the
three months ended March 31, 2002 and 2001 of $173,000 and $231,000,
respectively.

For the three month period ended March 31, 2002, the Partnership generated cash
flows from operating activities of $160,000, which includes a net loss of
$77,000, a gain on sale of equipment totaling $2,000, and depreciation and
amortization expenses of $544,000. Other noncash activities included in the
determination of net income include direct payments of lease income by lessees
to banks of $307,000.

For the three month period ended March 31, 2001, the Partnership generated cash
flows from operating activities of $385,000, which includes a net loss of
$130,000, a loss on sale of equipment totaling $23,000, and depreciation and
amortization expenses of $772,000. Other noncash activities included in the
determination of net (loss) include direct payments of lease income by lessees
to banks of $404,000.

Cash is invested in money market accounts that invest directly in treasury
obligations pending the Partnership's use of such funds to purchase additional
computer equipment, to pay Partnership expenses or to make distributions to the
Partners. At March 31, 2002, the Partnership had approximately $223,000 invested
in these money market accounts.


<PAGE>

At March 31, 2002, the Partnership has a receivable from Commonwealth Capital
Corp ("CCC"), a related party to the Partnership, in the amount of approximately
$325,000. CCC, through its indirect subsidiaries, including the General Partner
of the Partnership, earns fees based on revenues and new lease purchases from
this fund and other funds. This is a non-interest bearing receivable that CCC
intends to repay over the next three fiscal years from acquisition and debt
placement fees earned by the General Partner of the Partnership.

The Partnership's investment strategy of acquiring computer equipment and
generally leasing it under "triple-net leases" to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses. As
of March 31, 2002, the Partnership had future minimum rentals on non-cancelable
operating leases of $1,026,000 for the balance of the year ending December 31,
2002 and $1,865,000 thereafter. At March 31, 2002, the outstanding debt was
$2,264,000, with interest rates ranging from 6.50% to 9.75%, and will be payable
through December 2004.

The Partnership's cash from operations is expected to continue to be adequate to
cover all operating expenses, liabilities, and preferred distributions to
Partners during the next 12-month period. If available Cash Flow or Net
Disposition Proceeds are insufficient to cover the Partnership expenses and
liabilities on a short and long term basis, the Partnership will attempt to
obtain additional funds by disposing of or refinancing Equipment, or by
borrowing within its permissible limits. The Partnership may, from time to time,
reduce the distributions to its Partners if it deems necessary. Since the
Partnership's leases are on a "triple-net" basis, no reserve for maintenance and
repairs are deemed necessary.

The Partnership's share of the computer equipment in which they participate at
March 31, 2002 and December 31, 2001 was approximately $3,067,000 and
$2,969,000, respectively, which is included in the Partnership's fixed assets on
their balance sheet, and the total cost of the equipment shared by the
Partnership with other partnerships at March 31, 2002 and December 31, 2001 was
approximately $5,667,000 and $5,526,000, respectively. The Partnership's share
of the outstanding debt associated with this equipment at March 31, 2002 and
December 31, 2001 was approximately $1,464,000 and $1,581,000, respectively,
which is included in the Partnership's liabilities on the balance sheet, and the
total outstanding debt at March 31, 2002 and December 31, 2001 related to the
equipment shared by the Partnership was approximately $4,775,000 and $4,895,000,
respectively.

Results of Operations

Three Months Ended March 31, 2002 compared to Three Months Ended March 31, 2001
-------------------------------------------------------------------------------

For the quarter ended March 31, 2002, the Partnership recognized income of
$706,000 and expenses of $783,000, resulting in a net loss of $77,000. For the
quarter ended March 31, 2001, the Partnership recognized income of $832,000 and
expenses of $962,000, resulting in a net loss of $130,000.


<PAGE>

Lease income decreased by 15% to $703,000 for the quarter ended March 31, 2002,
from $830,000 for the quarter ended March 31, 2001, primarily due to the fact
that more lease agreements ended than new lease agreements acquired since the
quarter ended March 31, 2001.

Operating expenses, excluding depreciation, primarily consist of accounting,
legal, and outside service fees. The expense increased 16% to approximately
$110,000 for the quarter ended March 31, 2002, from $95,000 for the quarter
ended March 31, 2001, which is primarily attributable to an increase in
reimbursable expenses with the administration and operation of the Partnership
charged by Commonwealth Capital Corp., a related party, of $17,000, and an
increase in remarketing fees of $2,000, and a decrease in storage fees of
$4,000.

The equipment management fee is approximately 5% of the gross lease revenue
attributable to equipment that is subject to operating leases. The equipment
management fee decreased 15% to approximately $35,000 for the quarter ended
March 31, 2002, from $42,000 for the quarter ended March 31, 2001, which is
consistent with the decrease in lease income.

Depreciation and amortization expenses consist of depreciation on computer
equipment and amortization of equipment acquisition fees. The expenses decreased
29% to approximately $544,000 for the quarter ended March 31, 2002, from
$772,000 for the quarter ended March 31, 2001 due to equipment and acquisition
fees being fully depreciated/amortized and not being replaced with as many new
purchases.

The partnership recorded bad debt expenses of approximately $54,000 related to
disputed accounts receivables balances for the three months ended March 31,
2002.

The Partnership sold computer equipment with a net book value of $106,000 for
the quarter ended March 31, 2002, for a net gain of $2,000. The Partnership sold
computer equipment with a net book value of $37,000 for the quarter ended March
31, 2001, for a net loss of $23,000.

Interest expense increased 27% to $39,000 for the quarter ended March 31, 2002
from $31,000 for the quarter ended March 31, 2001, primarily due to the
acquisitions of new computer leases and the outstanding debt associated with it.

                        RECENT ACCOUNTING PRONOUNCEMENTS

                              Business Combinations

         In June 2001, the FASB issued Statement No. 141, "Business
Combinations." The Statement addresses financial accounting and reporting for
business combinations and supersedes APB Opinion No. 16, Business Combinations,
and FASB Statement No. 38, Accounting for Preacquisiton Contingencies of
Purchased Enterprises. All business combinations in the scope of the Statement
are to be accounted for using the purchase method. The provisions of the
Statement apply to all business combinations initiated after June 30, 2001. The
Statement also applies to all business combinations accounted for using the
purchase method for which the date of acquisition is July 1, 2001, or later.
There was no material, financial condition, or equity upon adoption of Statement
No. 141.


<PAGE>

                      Goodwill and Other Intangible Assets

         In June 2001, the FASB issued Statement No. 142, "Goodwill and Other
Intangible Assets." The Statement addresses financial accounting and reporting
for goodwill and other intangible assets and supersedes APB Opinion No. 17,
Intangible Assets. It addresses how tangible assets that are acquired
individually or with a group of other assets (but not those acquired in a
business combination) should be accounted for in financial statements upon their
acquisition. The Statement also addresses how goodwill and other intangible
assets should be accounted for after they have been initially recognized in the
financial statements.

         The provisions of the Statement are required to be applied starting
with fiscal years beginning after December 15, 2001, except that goodwill and
intangible assets acquired after June 30, 2001, will be subject immediately to
the non-amortization and amortization provisions of the Statement. Early
application is permitted for entities with fiscal years beginning after March
15, 2001, provided that the first interim financial statements have not
previously been issued. The Statement is required to be applied at the beginning
of an entity's fiscal year and to be applied to all goodwill and other
intangible assets recognized in its financial statements at that date. There was
no material impact on earnings, financial condition, or equity upon adoption of
Statement No. 142 at January 1, 2002.

                   Impairment or Disposal of Long-Lived Assets

         In August 2001, the FASB issued Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This Statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of. However, the Statement retains the
fundamental provisions of Statement 121 for (a) recognition and measurement of
the impairment of long-lived assets to be held and used and (b) measurement of
long-lived assets to be disposed of by sale.

         This Statement supersedes the accounting and reporting provisions of
APB Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of
Disposal of a Segment of a business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions, for the disposal of a segment of a business.
However, this Statement retains the requirement of Opinion 30 to report
discontinued operations separately from continuing operations and extends that
reporting to a component of an entity that either has been disposed of (by sale,
by abandonment, or in distribution to owners) or is classified as held for sale.
This Statement also amends ARB No. 51, Consolidated Financial Statements, to
eliminate the exception to consolidation for a temporarily controlled
subsidiary.

         The provisions of this Statement are effective for financial statements
issued for fiscal years beginning after December 15, 2001, and interim periods
within those fiscal years, with earlier application encouraged. The provisions
of this Statement generally are to be applied prospectively. The adoption of the
Statement on January 1, 2002, did not have a material impact on earnings,
financial condition, or equity.


<PAGE>

Part II: OTHER INFORMATION

                      Commonwealth Income & Growth Fund II

         Item 1.           Legal Proceedings.

                           On or about December 21, 2001, a complaint captioned
                           Commonwealth Capital Corp V. Avon Products, Inc. was
                           filed by Commonwealth Capital Corp against Avon
                           Products Inc. with the Federal District Court of the
                           Eastern District of Pennsylvania, No. 01-CV-6915. The
                           complaint alleges that the named defendant has failed
                           to make monthly payments on the existing lease terms.

                           On or about April 26, 2002, the Federal District
                           Court of the Eastern District of Pennsylvania has
                           denied Avon's request for Summary Judgement.

         Item 2.           Changes in Securities.

                           Inapplicable

         Item 3.           Defaults Upon Senior Securities.

                           Inapplicable

         Item 4.           Submission of Matters to a Vote of Securities
                           Holders.

                           Inapplicable

         Item 5.           Other Information.

                           Inapplicable

         Item 6.           Exhibits and Reports on Form 8-K.

                           a)       Exhibits:   None

                           b)       Report on Form 8-K:   None

         Item 7.A          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                           MARKET RISK

                              The Partnership believes its exposure to market
                           risk is not material due to the fixed interest rate
                           of its long-term debt.


<PAGE>
                                   SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                      COMMONWEALTH INCOME & GROWTH FUND II
                                            BY: COMMONWEALTH INCOME &
                                            GROWTH FUND, INC. General Partner


_______________                       By:________________________
Date                                  George S. Springsteen
                                      President