<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 SEPTEMBER 30, 2004

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

                        Commission File Number: 33-89476

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

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

                          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 [ ]

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12c-2 of the Act): YES [ ] NO [X]


<PAGE>

<TABLE>
<CAPTION>
                              COMMONWEALTH INCOME & GROWTH FUND II, L.P.
                                            BALANCE SHEETS


                                                                  SEPTEMBER 30,        DECEMBER 31,
                                                                       2004                2003
                                                                  ----------------------------------
                                                                    (UNAUDITED)
<S>                                                               <C>                  <C>
ASSETS

Cash and cash equivalents                                         $        3,028       $     37,758
Lease income receivable                                                   11,731              4,550
Net investment in direct financing leases                                101,485            146,478
Other receivables - Affiliated limited partnerships                       12,743              7,888
Prepaid expenses                                                           2,827              3,200
                                                                  ----------------------------------
                                                                         131,814            199,874
                                                                  ----------------------------------

Computer equipment, at cost                                            3,408,971          5,409,223
Accumulated depreciation                                              (2,732,068)        (4,013,668)
                                                                  ----------------------------------
                                                                         676,903          1,395,555
                                                                  ----------------------------------

Equipment acquisition costs and deferred expenses, net                     7,167             42,906
Accounts receivable, Commonwealth Capital Corp                                 -            354,122
                                                                  ----------------------------------
                                                                           7,167            397,028
                                                                  ----------------------------------

TOTAL ASSETS                                                      $      815,884       $  1,992,457
                                                                  ==================================

LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES
Accounts payable                                                  $       98,095       $     53,606
Accounts payable - General Partner                                        35,070             20,065
Accounts payable - Commonwealth Capital Corp.                             46,142                  -
Other accrued expenses                                                     2,300              5,938
Unearned lease income                                                     95,011            100,040
Notes payable                                                            194,801            728,365
                                                                  ----------------------------------
TOTAL LIABILITIES                                                        471,419            908,014
                                                                  ----------------------------------
PARTNERS' CAPITAL
General partner                                                            1,000              1,000
Limited partners                                                         343,465          1,083,443
                                                                  ----------------------------------
TOTAL PARTNERS' CAPITAL                                                  344,465          1,084,443
                                                                  ----------------------------------

TOTAL LIABILITIES AND PARTNERS' CAPITAL                           $      815,884      $   1,992,457
                                                                  ==================================
</TABLE>

                 see accompanying notes to financial statements


<PAGE>

<TABLE>
<CAPTION>
                                         COMMONWEALTH INCOME & GROWTH FUND II, L.P.
                                                  STATEMENTS OF OPERATIONS

                                                            THREE MONTHS ENDED                    NINE MONTHS ENDED
                                                               SEPTEMBER 30,                        SEPTEMBER 30,
                                                          2004               2003               2004              2003
                                                       --------------------------------------------------------------------
                                                                (UNAUDITED)                          (UNAUDITED)
<S>                                                     <C>               <C>                 <C>              <C>
INCOME
Lease                                                   $  168,910        $   300,754         $  618,753       $ 1,252,614
Interest and other                                           2,701                379              3,116             1,852
Gain on sale of computer equipment                               -                  -                  -           304,905
                                                       --------------------------------------------------------------------

TOTAL INCOME                                               171,611            301,133            621,869         1,559,371
                                                       --------------------------------------------------------------------

EXPENSES
Operating                                                  104,262             90,042            338,469           427,646
Equipment management fee - General Partner                   8,446             15,038             30,938            62,631
Interest                                                     4,807             19,417             23,695            73,794
Depreciation                                               180,020            229,315            555,172           730,184
Amortization of equipment
  acquisition costs and deferred expenses                   12,163             16,359             36,756            48,411
Loss on sale of computer equipment                           6,746             13,414             30,498                 -
                                                       --------------------------------------------------------------------
TOTAL EXPENSES                                             316,444            383,585          1,015,528         1,342,666
                                                       --------------------------------------------------------------------

NET (LOSS) INCOME                                       $ (144,833)       $   (82,452)        $ (393,659)      $   216,705
                                                       ====================================================================
NET (LOSS) INCOME PER EQUIVALENT LIMITED
  PARTNERSHIP UNIT                                      $   (0.31)        $     (0.18)        $    (0.86)      $      0.47
                                                       ====================================================================
WEIGHTED AVERAGE NUMBER OF EQUIVALENT LIMITED
  PARTNERSHIP UNITS OUTSTANDING DURING THE PERIOD          460,067            460,067            460,067           460,067
                                                       ====================================================================

                                       see accompanying notes to financial statements
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
                                     COMMONWEALTH INCOME & GROWTH FUND II, L.P.
                                           STATEMENTS OF PARTNERS' CAPITAL

                                                          FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
                                                                         (UNAUDITED)

                                                GENERAL      LIMITED
                                                PARTNER      PARTNER      GENERAL         LIMITED
                                                 UNITS        UNITS       PARTNER         PARTNER          TOTAL
                                            ------------------------------------------------------------------------
<S>                                              <C>         <C>         <C>         <C>               <C>
PARTNERS' CAPITAL - DECEMBER 31, 2003             50          460,067     $ 1,000     $ 1,083,443       $ 1,084,443
                                            ------------------------------------------------------------------------
  Net income (loss)                                                         3,463        (397,122)         (393,659)
  Distributions                                                            (3,463)       (342,856)         (346,319)
                                            ------------------------------------------------------------------------
PARTNERS' CAPITAL - SEPTEMBER 30, 2004            50          460,067     $ 1,000     $   343,465       $   344,465
                                            ========================================================================







                                   see accompanying notes to financial statements
</TABLE>



<PAGE>

<TABLE>
<CAPTION>
                                COMMONWEALTH INCOME & GROWTH FUND II, L.P.
                                          STATEMENTS OF CASH FLOW
                           FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003


                                                                                  2004           2003
                                                                             -----------------------------
<S>                                                                           <C>              <C>
OPERATING ACTIVITIES                                                          (UNAUDITED)     (UNAUDITED)
Net (loss) income                                                             $   (393,659)    $  216,705
Adjustments to reconcile net (loss) income to net cash
   (used in) provided by operating activities
       Depreciation and amortization                                               591,928        778,595
       Amortization of unearned lease income                                             -         (8,213)
       Loss (gain) on sale of computer equipment                                    30,498       (304,905)
       Other noncash activities included in
          determination of net (loss) income                                      (507,971)      (780,517)
     Changes in assets and liabilities
         (Increase) decrease in assets
              Lease income receivable                                               (7,181)       407,028
              Minimum direct finance lease receivables                               2,310          2,237
              Accounts receivable, General Partner                                 122,361          2,084
              Other receivables - Affiliated limited partnerships                   (4,855)        (3,075)
              Prepaid expenses                                                         373           (481)
         Increase (decrease) in liabilities
              Accounts payable                                                      44,489        (19,650)
              Accounts payable - Commonwealth Capital Corp.                         46,142              -
              Other accrued expenses                                                (3,638)        (7,362)
              Unearned lease income                                                 (5,029)      (100,767)
                                                                             -----------------------------

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                                (84,232)       181,679
                                                                             -----------------------------
INVESTING ACTIVITIES:

Capital expenditures                                                                (4,049)       (15,000)
Net proceeds from the sale of computer equipment                                   154,121        404,175
Long term unearned lease income                                                          -         32,586
Equipment acquisition fees paid to General Partner                                    (846)          (600)
                                                                             -----------------------------

NET CASH PROVIDED BY INVESTING ACTIVITIES                                          149,226        421,161
                                                                             -----------------------------

FINANCING ACTIVITIES:
Distributions to partners                                                         (346,319)      (461,761)
Other receivables-Commonwealth Capital Corp                                        246,766         91,216
Debt placement fee paid to the General Partner                                        (171)             -
                                                                             -----------------------------

NET CASH (USED IN) FINANCING ACTIVITIES                                            (99,724)      (370,545)
                                                                             -----------------------------

Net (decrease) increase in cash and equivalents                                    (34,730)       232,295
Cash and cash equivalents, beginning of period                                      37,758         33,361
                                                                             -----------------------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                      $      3,028     $  265,656
                                                                             =============================


                              see accompanying notes to financial statements

</TABLE>

<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 ("CCC"), on
                           behalf of the Partnership and other affiliated
                           partnerships, acquires computer equipment subject to
                           associated debt obligations and lease agreements 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 CCC. CCC is a
                           member of the Investment Program Association (IPA),
                           Financial Planning Association (FPA), and the
                           Equipment Leasing Association (ELA). 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 has begun the
                           liquidation phase - See note 2), the Partnership will
                           continue until December 31, 2006.

2. SUMMARY OF              BASIS OF PRESENTATION
   SIGNIFICANT
   ACCOUNTING              The  financial  information  presented as of any
   POLICIES                date 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 the Partnership,
                           but does not include all disclosures required by
                           accounting principles generally accepted in the
                           United States. 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, 2003. Operating results for
                           the nine-month period ended September 30, 2004 are
                           not necessarily indicative of financial results that
                           may be expected for the full year ended December 31,
                           2004.


<PAGE>

                           REVENUE RECOGNITION

                           Through September 30, 2004, the Partnership's leasing
                           operations consist substantially of operating leases
                           and seven direct-financing leases. Operating lease
                           revenue is recognized on a monthly basis in
                           accordance with the terms of the lease agreement.
                           Unearned revenue from direct financing agreements is
                           amortized to revenue over the lease term using the
                           straight-line method.

                           The Partnership reviews a customer's credit history
                           before extending credit and establishes a provision
                           for uncollectible accounts receivable based upon the
                           credit risk of specific customers, historical trends
                           and other information.

                           USE OF ESTIMATES

                           The preparation of financial statements in conformity
                           with accounting principles generally accepted in the
                           United States 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.

                           LIQUIDATION POLICIES

                           The Partnership has begun liquidation during the
                           quarter ended September 30, 2004. Particular items of
                           equipment may be sold at any time if, in the judgment
                           of the General Partner, it is in the best interest of
                           the Partnership to do so. The determination of
                           whether particular items of partnership equipment
                           should be sold will be made by the General Partner
                           after consideration of all relevant factors
                           (including prevailing economic conditions, the cash
                           requirements of the Partnership, potential capital
                           appreciation, cash flow and federal income tax
                           considerations), with a view toward achieving the
                           principal investment objectives of the Partnership.

                           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 September 30,
                           2004, there is no impairment.
<PAGE>

                           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
                           and deferred expenses are charged to amortization
                           expense when the associated leased equipment is sold.

                           CASH AND CASH EQUIVALENTS

                           The Partnership considers all highly liquid
                           investments with a maturity of three months or less
                           to be cash equivalents. Cash equivalents have been
                           invested in a money market fund investing directly in
                           Treasury obligations. The Partnership maintains its
                           cash balances in a financial institution. At times,
                           the balances may exceed federally insured limits. The
                           Partnership has not experienced any losses in such
                           accounts, and believes it is not exposed to any
                           significant credit risk.

                           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.

                           OFFERING COSTS

                           Offering costs are payments for selling commissions,
                           dealer manager fees, professional fees and other
                           offering expenses relating to the syndication.
                           Selling commissions were 7% of the partners'
                           contributed capital and dealer manager fees were 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.

                           REIMBURSABLE EXPENSES

                           Reimbursable expenses, which are charged to the
                           Partnership by CCC in connection with the
                           administration and operation of the Partnership, are
                           allocated to the Partnership based upon several
                           factors including, but not limited to, the number of
                           investors, compliance issues, and the number of
                           existing leases.


<PAGE>

3. NET INVESTMENT IN       The following lists the components of the net
   DIRECT FINANCING        investment in direct financing leases as of September
   LEASES                  30, 2004 and December 31, 2003:

<TABLE>
<CAPTION>
                                                                               SEPTEMBER 30,   December 31,
                                                                                    2004           2003
                                                                               ----------------------------
<S>                                                                            <C>                <C>
                           Minimum lease payments receivable                   $ 121,594          $ 176,035
                           Less: Unearned revenue                                 20,469             29,557
                           --------------------------------------------------------------------------------
                           Net investment in direct financing leases           $ 101,485          $ 146,478
                           --------------------------------------------------------------------------------

                           The following is a schedule of future minimum rentals on noncancellable direct
                           financing leases at September 30, 2004


                                                                                                  Amount
                                                                                               ------------

                           Three Months ending December 31, 2004                               $     17,667
                           Year Ended December 31, 2005                                              70,183
                           Year Ended December 31, 2006                                              33,744
                                                                                               ------------

                                                                                               $    121,594
                           ================================================================================
</TABLE>

4. COMPUTER                The Partnership is the lessor of equipment under
   EQUIPMENT               operating leases with periods ranging from 24 to 48
                           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 with other partnerships at
                           September 30, 2004 and December 31, 2003 was
                           approximately $1,660,000 for both period ends, 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 September 30, 2004 and December 31,
                           2003 was approximately $2,813,000 for both period
                           ends. The Partnership's share of the outstanding debt
                           associated with this equipment at September 30, 2004
                           and December 31, 2003 was approximately $47,000 and
                           $422,000, respectively, which is included in the
                           Partnership's notes payables on the balance sheet,
                           and the total outstanding debt at September 30, 2004
                           and December 31, 2003 related to the equipment shared
                           by the Partnership was approximately $69,000 and
                           $696,000, respectively.
<PAGE>

                           The following is a schedule of future minimum rentals
                           on noncancellable operating leases at September 30,
                           2004:

                                                                        Amount
                           -----------------------------------------------------
                             Three Months ending December 31, 2004    $  75,000
                             Year Ended December 31, 2005                54,000
                             Year Ended December 31, 2006                13,000
                           -----------------------------------------------------

                                                                      $ 142,000
                           =====================================================

5. RELATED PARTY           OTHER RECEIVABLES
   TRANSACTIONS
                           As of June 30, 2004, the Partnership had an
                           unsecured, non-interest bearing receivable from CCC,
                           a related party to the Partnership, in the amount of
                           approximately $115,000. CCC, through its indirect
                           subsidiaries, including the General Partner of the
                           Partnership, earns fees based on revenues and new
                           lease purchases from this fund. This receivable has
                           been fully reimbursed by CCC in the nine months
                           ending September 30, 2004 by the offsetting of
                           equipment management and acquisition fees and
                           payments by CCC as well as making a cash payments of
                           approximately $106,000 in September 2004.

                           REIMBURSABLE EXPENSES

                           The General Partner and its affiliates are entitled
                           to reimbursement by the Partnership for the cost of
                           supplies and services obtained and used by the
                           General Partner in connection with the administration
                           and operation of the Partnership from third parties
                           unaffiliated with the General Partner. In addition,
                           the General Partner and its affiliates are entitled
                           to reimbursement for certain expenses incurred by the
                           General Partner and its affiliates in connection with
                           the administration and operation of the Partnership.
                           During the nine months ended September 30, 2004 and
                           2003, the Partnership recorded $214,000 and $278,000,
                           respectively, for reimbursement of expenses to the
                           General Partner.

                           EQUIPMENT ACQUISITION FEE

                           The General Partner is entitled to be paid an
                           equipment acquisition fee of 4% of the purchase price
                           of each item of equipment purchased as compensation
                           for the negotiation of the acquisition of the
                           equipment and lease thereof or sale under a
                           conditional sales contract. During the nine months
                           ended September 30, 2004 and 2003, equipment
                           acquisition fees of approximately $1,000 were earned
                           by the General Partner for both periods. As of
                           September 30, 2004, the unpaid balance was
                           approximately $1,000. As of December 31, 2003, there
                           was no outstanding balance.

                           EQUIPMENT MANAGEMENT FEE

                           The General Partner is entitled to be paid a monthly
                           fee equal to the lesser of (i) the fees which would
                           be charged by an independent third party for similar
                           services for similar equipment or (ii) the sum of (a)
                           two percent of (1) the gross lease revenues
                           attributable to equipment which is subject to full
                           payout net leases which contain net lease provisions
                           plus (2) the purchase price paid on conditional sales
                           contracts as received by the Partnership and (b) 5%
                           of the gross lease revenues attributable to equipment

<PAGE>

                           which is subject to operating and capital leases.
                           During the nine months ended September 30, 2004 and
                           2003, equipment management fees of approximately
                           $31,000 and $63,000, respectively, were earned by the
                           General Partner. As of September 30, 2004, the unpaid
                           balance was approximately $16,000. As of December 31,
                           2003, there was no outstanding balance.

                           EQUIPMENT LIQUIDATION FEE

                           With respect to each item of equipment sold by the
                           General Partner (other than in connection with a
                           conditional sales contract), a fee equal to the
                           lesser of (i) 50% of the competitive equipment sale
                           commission or (ii) three percent of the sales price
                           for such equipment is payable to the General Partner.
                           The payment of such fee is subordinated to the
                           receipt by the limited partners of the net
                           disposition proceeds from such sale in accordance
                           with the Partnership Agreement. Such fee will be
                           reduced to the extent any liquidation or resale fees
                           are paid to unaffiliated parties. During the nine
                           months ended September 30, 2004 and 2003, equipment
                           liquidation fees of approximately $5,000 and $23,000,
                           respectively, were earned by the General Partner. As
                           of September 30, 2004 and December 31, 2003, the
                           unpaid balance was approximately $20,000 and $10,000,
                           respectively.

6. NOTES PAYABLE           Notes payable consisted of the following:

<TABLE>
<CAPTION>
                                                                                   SEPTEMBER 30,    DECEMBER 31,
                                                                                       2004            2003
                           --------------------------------------------------------------------------------------
<S>                                                                                 <C>              <C>
                           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 November 2004                           $  45,217        $  498,520

                           Installment notes payable to banks; interest
                           ranging from 6.00% to 6.75%, due in monthly
                           installments ranging from $240 to $1,875,
                           including interest, with final payments due from
                           February through June 2005
                                                                                       38,110            74,204

                           Installment notes payable to banks, interest
                           ranging from 5.95% to 6.50%: due in monthly
                           installments ranging from $507 to $1,892,
                           including interest, with final payments due June,
                           2006                                                       111,474           155,641
                                                                                    -----------------------------
                                                                                    $ 194,801        $  728,365
                           ======================================================================================
                           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 September 30, 2004 are as follows:

                                                                                                       Amount
                                                                                                     ---------

                                        Three months ending December 31, 2004                        $  78,833
                                        Year ended December 31, 2005                                    82,902
                                        Year ended December 31, 2006                                    33,066
                                                                                                     ---------
                                                                                                     $ 194,801
                                                                                                     =========
</TABLE>
7. SUPPLEMENTAL            Other noncash activities included in the
   CASH FLOW               determination of net loss are as follows:
   INFORMATION

<TABLE>
<CAPTION>
Nine months ended September 30,                                 2004                       2003
---------------------------------------------------------------------------------------------------
<S>                                                          <C>                        <C>
Lease income, net of interest expense on
   notes payable realized as a result of
   direct payment of principal by lessee to bank             $  507,971                 $  780,517
===================================================================================================

           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:

Nine months ended September 30,                                 2004                       2003
---------------------------------------------------------------------------------------------------

Debt assumed in connection with purchase
   of computer equipment                                     $   17,090                 $        -
===================================================================================================
Net book value of equipment converted to direct
   financing leases                                          $        -                 $    3,346
===================================================================================================
Offsetting of receivables from CCC with payables to
     General Partner                                         $  246,766                 $        -
===================================================================================================
</TABLE>

<PAGE>

       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 2 of the Notes to the
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:

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 September 30, 2004, the Partnership's leasing operations consist
substantially of operating leases and seven direct-financing leases. Operating
lease revenue is recognized on a monthly basis in accordance with the terms of
the lease agreement. Unearned revenue from direct financing agreements is
amortized to revenue over the lease term.

The Partnership reviews a customer's credit history before extending credit and
establishes a provision for uncollectible accounts receivable based upon the
credit risk of specific customers, historical trends and other information.

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 nine months ended September
30, 2004 and 2003 were net proceeds received from sale of equipment totaling
approximately $154,000 and $404,000, respectively and the repayment of
receivables from CCC of approximately $247,000 and $91,000, respectively and
cash provided from operations of approximately $182,000 for the nine months
ended September 30, 2003. The primary uses of cash for the nine months ended
September 30, 2004 and 2003 were the payment of preferred distributions to
partners of approximately $346,000 and $462,000, respectively, and capital
expenditures for new equipment totaling approximately $4,000 and $15,000,
respectively. The Partnership used cash from operations of approximately $84,000
for the nine months ended September 30, 2004.


<PAGE>

For the nine month period ended September 30, 2004, the Partnership used cash
flows from operating activities of approximately $84,000, which includes a net
loss of approximately $394,000 and depreciation and amortization expenses of
approximately $592,000. Other noncash activities included in the determination
of net income include direct payments of lease income by lessees to banks of
approximately $508,000.

For the nine month period ended September 30, 2003, the Partnership generated
cash flows from operating activities of approximately $182,000, which includes
net income of $217,000, a gain on sale of equipment totaling $305,000, and
depreciation and amortization expenses of $779,000. Other noncash activities
included in the determination of net loss include direct payments of lease
income by lessees to banks of $781,000.

As of June 30, 2004, the Partnership had an unsecured, non-interest bearing
receivable from CCC, a related party to the Partnership, in the amount of
approximately $115,000. CCC, through its indirect subsidiaries, including the
General Partner of the Partnership, earns fees based on revenues and new lease
purchases from this fund. This receivable has been fully reimbursed by CCC in
the nine months ending September 30, 2004 by the offsetting of equipment
management and acquisition fees and payments by CCC as well as making a cash
payments of approximately $106,000 in September 2004.

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 September 30, 2004, the Partnership had future minimum rentals on
non-cancelable operating leases of $75,000 for the balance of the year ending
December 31, 2004 and $67,000 thereafter. As of September 30, 2004, the
Partnership had future minimum rentals on noncancellable capital leases of
$36,000 for the balance of the year ending December 31, 2004 and $104,000
thereafter. At September 30, 2004, the outstanding debt was $195,000, with
interest rates ranging from 5.95% to 8.75%, and will be payable through June
2006.

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 with
other partnerships at September 30, 2004 and December 31, 2003 was approximately
$1,660,000 for both period ends, 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 September 30, 2004 and December 31, 2003
was approximately $2,813,000 for both period ends. The Partnership's share of
the outstanding debt associated with this equipment at September 30, 2004 and
December 31, 2003 was approximately $47,000 and $422,000, respectively, which is
included in the Partnership's notes payables on the balance sheet, and the total
outstanding debt at September 30, 2004 and December 31, 2003 related to the
equipment shared by the Partnership was approximately $69,000 and $696,000,
respectively.


<PAGE>

The Partnership has begun liquidation during the quarter ended September 30,
2004. Particular items of equipment may be sold at any time if, in the judgment
of the General Partner, it is in the best interest of the Partnership to do so.
The determination of whether particular items of partnership equipment should be
sold will be made by the General Partner after consideration of all relevant
factors (including prevailing economic conditions, the cash requirements of the
Partnership, potential capital appreciation, cash flow and federal income tax
considerations), with a view toward achieving the principal investment
objectives of the Partnership.

RESULTS OF OPERATIONS

                Three Months Ended September 30, 2004 compared to
                     Three Months Ended September 30, 2003

For the quarter ended September 30, 2004, the Partnership recognized income of
approximately $172,000 and expenses of approximately $317,000, resulting in a
net loss of approximately $145,000. For the quarter ended September 30, 2003,
the Partnership recognized income of approximately $301,000 and expenses of
approximately $384,000, resulting in a net loss of approximately $83,000.

Lease income decreased by 44% to approximately $169,000 for the quarter ended
September 30, 2004, from approximately $301,000 for the quarter ended September
30, 2003, primarily due to the fact that more lease agreements ended since the
quarter ended September 30, 2003.

Operating expenses, excluding depreciation, primarily consist of accounting,
legal, outside service fees and reimbursement of expenses to CCC for
administration and operation of the Partnership. The expense increased 16% to
approximately $104,000 for the quarter ended September 30, 2004, from
approximately $90,000 for the quarter ended September 30, 2003, which is
primarily attributable to an increase in remarketing fees of approximately
$53,000. There was a decrease in the amount charged by CCC, a related party, to
the Partnership for the administration and operation of approximately $13,000, a
decrease in professional fees of approximately $10,000, a decrease in due
diligence expenses of approximately $6,000, a decrease imprinting services of
approximately $5,000, a decrease in postage/shipping expenses of approximately
$8,000 and a decrease in communications of approximately $2,000.

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 44% to approximately $8,000 for the quarter ended
September 30, 2004, from approximately $15,000 for the quarter ended September
30, 2003, 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
22% to approximately $192,000 for the quarter ended September 30, 2004, from
approximately $246,000 for the quarter ended September 30, 2003 due to equipment
and acquisition fees being fully depreciated/amortized and not being replaced
with new purchases.


<PAGE>

The Partnership sold computer equipment with a net book value of approximately
$94,000 for the quarter ended September 30, 2004, for a net loss of
approximately $7,000. The Partnership sold computer equipment with a net book
value of approximately $35,000 for the quarter ended September 30, 2003, for a
net loss of approximately $13,000.

Interest expense decreased 75% to approximately $5,000 for the quarter ended
September 30, 2004 from approximately $19,000 for the quarter ended September
30, 2003, primarily due to the decrease in debt relating to the purchase of
computer equipment.

                Nine Months Ended September 30, 2004 compared to
                      Nine Months Ended September 30, 2003

For the nine months ended September 30, 2004, the Partnership recognized income
of approximately $622,000 and expenses of approximately $1,016,000, resulting in
a net loss of approximately $394,000. For the nine months ended September 30,
2003, the Partnership recognized income of approximately $1,559,000 and expenses
of approximately $1,342,000, resulting in net income of approximately $217,000.

Lease income decreased by 51% to approximately $619,000 for the nine months
ended September 30, 2004, from approximately $1,253,000 for the nine months
ended September 30, 2003, primarily due to the fact that more lease agreements
ended since the nine months ended September 30, 2003.

Operating expenses, excluding depreciation, primarily consist of accounting,
legal, outside service fees and reimbursement of expenses to CCC for
administration and operation of the Partnership. The expense decreased 21% to
approximately $338,000 for the nine months ended September 30, 2004, from
approximately $428,000 for the nine months ended September 30, 2003, which is
primarily attributable to a decrease in remarketing fees of approximately
$54,000, a decrease in due diligence expenses of approximately $21,000, a
decrease in postage/shipping expenses of approximately $15,000, a decrease in
conventions of approximately $2,000 and a decrease in printing services of
approximately $11,000, a decrease in communication expenses of approximately
$4,000. There was also an increase in the amount charged by CCC, a related
party, to the Partnership for the administration and operation of approximately
$22,000

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 51% to approximately $31,000 for the nine months ended
September 30, 2004, from approximately $63,000 for the nine months ended
September 30, 2003, 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
24% to approximately $592,000 for the nine months ended September 30, 2004, from
approximately $779,000 for the nine months ended September 30, 2003 due to
equipment and acquisition fees being fully depreciated/amortized and not being
replaced with new purchases.


<PAGE>

The Partnership sold computer equipment with a net book value of approximately
$185,000 for the nine months ended September 30, 2004, for a net loss of
approximately $30,000. The Partnership sold computer equipment with a net book
value of approximately $99,000 for the nine months ended September 30, 2003, for
a net gain of approximately $305,000.

Interest expense decreased 68% to approximately $24,000 for the nine months
ended September 30, 2004 from approximately $74,000 for the nine months ended
September 30, 2003, primarily due to the decrease in debt relating to the
purchase of computer equipment.

ITEM 3.  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.

ITEM 4.  CONTROLS AND PROCEDURES

The Chief Executive Officer and a Financial Officer of the Partnership have
conducted a review of the Partnership's disclosure controls and procedures as of
September 30, 2004.

The Partnership's disclosure controls and procedures include the Partnership's
controls and other procedures designed to ensure that information required to be
disclosed in this and other reports filed under the Securities Exchange Act of
1934, as amended (the " Exchange Act") is accumulated and communicated to the
Partnership's management, including its chief executive officer and a financial
officer, to allow timely decisions regarding required disclosure and to ensure
that such information is recorded, processed, summarized and reported with the
required time quarters.

Based upon this review, the Partnership's Chief Executive Officer and a
Financial Officer have concluded that the Partnership's disclosure controls (as
defined in Rule 13a-14c promulgated under the Exchange Act) are sufficiently
effective to ensure that the information required to be disclosed by the
Partnership in the reports it files under the Exchange Act is recorded,
processed, summarized and reported with adequate timeliness.


<PAGE>

PART II:   OTHER INFORMATION

                      COMMONWEALTH INCOME & GROWTH FUND II

         Item 1.  LEGAL PROCEEDINGS.

                  Inapplicable

         Item 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

                  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

                     31.1 THE RULE 15D-14(A)
                     31.2 THE RULE 15D-14(A)
                     32.1 SECTION 1350 CERTIFICATION OF CEO
                     32.2 SECTION 1350 CERTIFICATION OF CFO


                                    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

November 15, 2004                       By: /s/ George S. Springsteen
-----------------                           --------------------------
Date                                    George S. Springsteen
                                        President