<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 JUNE 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
             (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>

                          COMMONWEALTH INCOME & GROWTH FUND II
                                     BALANCE SHEETS
<TABLE>
<CAPTION>
                                                            JUNE 30,        DECEMBER 31,
                                                             2004               2003
                                                          -----------------------------
                                                          (UNAUDITED)
<S>                                                       <C>               <C>
ASSETS

Cash and cash equivalents                                 $    64,598       $    37,758
Lease income receivable                                         5,434             4,550
Net investment in direct financing leases                     116,483           146,478
Other receivables - General Partner                             6,009                 -
Other receivables - Affiliated limited partnerships             5,839             7,888
Prepaid expenses                                                5,454             3,200
                                                          -----------------------------
                                                              203,817           199,874
                                                          -----------------------------

Computer equipment, at cost                                 5,002,531         5,409,223
Accumulated depreciation                                   (4,052,092)       (4,013,668)
                                                          -----------------------------
                                                              950,439         1,395,555
                                                          -----------------------------


Equipment acquisition costs and deferred expenses, net         19,330            42,906
Accounts receivable, Commonwealth Capital Corp                114,615           354,122
                                                          -----------------------------
                                                              133,945           397,028
                                                          -----------------------------

TOTAL ASSETS                                              $ 1,288,201       $ 1,992,457
                                                          =============================


LIABILITIES AND PARTNERS' CAPITAL

LIABILITIES
Accounts payable                                          $   162,717       $    53,606
Accounts payable - General Partner                                  -            20,065
Other accrued expenses                                              -             5,938
Unearned lease income                                          96,231           100,040
Notes payable                                                 357,439           728,365
                                                          -----------------------------
TOTAL LIABILITIES                                             616,387           908,014
                                                          -----------------------------

PARTNERS' CAPITAL
General partner                                                 1,000             1,000
Limited partners                                              670,814         1,083,443
                                                          -----------------------------
TOTAL PARTNERS' CAPITAL                                       671,814         1,084,443
                                                          -----------------------------

TOTAL LIABILITIES AND PARTNERS' CAPITAL                   $ 1,288,201       $ 1,992,457
                                                          =============================
</TABLE>



                 see accompanying notes to financial statements



<PAGE>


<TABLE>
<CAPTION>
                                       COMMONWEALTH INCOME & GROWTH FUND II
                                             STATEMENTS OF OPERATIONS


                                                             THREE MONTHS ENDED            SIX MONTHS ENDED
                                                                  JUNE 30,                     JUNE 30,
                                                             2004          2003          2004             2003
                                                           ----------------------      -------------------------
                                                                 (UNAUDITED)                 (UNAUDITED)
<S>                                                        <C>           <C>           <C>            <C>
INCOME
Lease                                                      $217,069      $409,334      $ 449,843      $  951,860
Interest and other                                              278         1,298            415           1,473
Gain on sale of computer equipment                                -       323,511              -         318,319
                                                           --------      --------      ---------      ----------
TOTAL INCOME                                                217,347       734,143        450,258       1,271,652
                                                           --------      --------      ---------      ----------

EXPENSES
Operating, excluding depreciation                            55,690       143,741        167,130         337,604
Equipment management fee - General Partner                   10,853        20,466         22,492          47,593
Interest                                                      7,861        24,427         18,888          54,377
Depreciation                                                183,422       234,607        375,152         500,869
Amortization of equipment
  acquisition costs and deferred expenses                    12,370        15,674         24,593          32,052
Loss on sale of computer equipment                           13,861             -         23,752               -
                                                           --------      --------      ---------      ----------
TOTAL EXPENSES                                              284,057       438,915        632,007         972,495
                                                           --------      --------      ---------      ----------

NET (LOSS) INCOME                                          $(66,710)     $295,228      $(181,749)     $  299,157
                                                           ========      ========      =========      ==========

NET (LOSS) INCOME PER EQUIVALENT LIMITED
  PARTNERSHIP UNIT                                         $  (0.15)     $   0.64      $   (0.40)     $     0.65
                                                           ========      ========      =========      ==========

WEIGHTED AVERAGE NUMBER OF EQUIVALENT LIMITED
  PARTNERSHIP UNITS OUTSTANDING DURING THE PERIOD           460,067       460,067        460,067         460,067
                                                           ========      ========      =========      ==========
</TABLE>



                 see accompanying notes to financial statements


<PAGE>
<TABLE>
<CAPTION>
                                       COMMONWEALTH INCOME & GROWTH FUND II
                                         STATEMENTS OF PARTNERS' CAPITAL

                                                         FOR THE SIX MONTHS ENDED JUNE 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)                                                      2,309          (184,058)       (181,749)
  Distributions                                                         (2,309)         (228,571)       (230,880)
                                                 --      -------       -------        ----------      ----------
PARTNERS' CAPITAL - JUNE 30, 2004                50      460,067       $ 1,000        $  670,814      $  671,814
                                                 ==      =======       =======        ==========      ==========
</TABLE>








                 see accompanying notes to financial statements



<PAGE>

                             COMMONWEALTH INCOME & GROWTH FUND II
                                   STATEMENTS OF CASH FLOW
                       FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003
<TABLE>
<CAPTION>
                                                                      2004           2003
                                                                    ---------      ---------
<S>                                                                 <C>            <C>
OPERATING ACTIVITIES                                                       (UNAUDITED)
Net (loss) income                                                   $(181,749)     $ 299,157
Adjustments to reconcile net (loss) income to net cash
   provided by (used in) operating activities
       Depreciation and amortization                                  399,745        532,921
       Loss (gain) on sale of computer equipment                       23,752       (318,319)
      Other noncash activities included in
          determination of net (loss) income                         (360,331)      (536,047)
     Changes in assets and liabilities
         (Increase) decrease in assets
              Lease income receivable                                    (884)         4,004
              Minimum lease receivables                                 2,310            978
              Other receivable, General Partner                        81,282         75,270
              Other receivables - Affiliated limited partnerships       2,049          2,959
              Prepaid expenses                                         (2,254)         3,019
         Increase (decrease) in liabilities
              Accounts payable                                        109,111         (4,602)
              Other accrued expenses                                   (5,938)        (7,362)
              Unearned lease income                                    (3,809)       (74,885)
                                                                    ---------      ---------


NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                    63,284        (22,907)
                                                                    ---------      ---------

INVESTING ACTIVITIES:


Capital expenditures                                                   (4,049)       (15,000)
Net proceeds from the sale of computer equipment                       67,351        382,317
Equipment acquisition fees paid to General Partner                       (846)          (600)
                                                                    ---------      ---------

NET CASH PROVIDED BY INVESTING ACTIVITIES                              62,456        366,717
                                                                    ---------      ---------

FINANCING ACTIVITIES:
Distributions to partners                                            (230,880)      (288,601)
Other receivables-Commonwealth Capital Corp                           132,151         81,287
Debt placement fee paid to the General Partner                           (171)             -
                                                                    ---------      ---------

NET CASH (USED IN) FINANCING ACTIVITIES                               (98,900)      (207,314)
                                                                    ---------      ---------


Net increase in cash and equivalents                                   26,840        136,496
Cash and cash equivalents, beginning of period                         37,758         33,361
                                                                    ---------      ---------

CASH AND CASH EQUIVALENTS, END OF PERIOD                            $  64,598      $ 169,857
                                                                    =========      =========
</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 ("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 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 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, 2003. Operating results
                               for the six-month period ended June 30, 2004 are
                               not necessarily indicative of financial results
                               that may be expected for the full year ended
                               December 31, 2004.

                               REVENUE RECOGNITION

                               Through June 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.




<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.

                               LIQUIDATION POLICIES

                               The Partnership has begun liquidation during the
                               quarter ended June 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 June
                               30, 2004, 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 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.




<PAGE>

                               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.

3.  NET INVESTMENT IN          The following lists the components of the net
    DIRECT FINANCING           investment in direct financing leases as of June
    LEASES                     30, 2004 and December 31, 2003:
<TABLE>
<CAPTION>
                                                                             JUNE 30,     December 31,
                                                                               2004           2003
                                                                             -----------------------
                               <S>                                           <C>          <C>
                               Minimum lease payments
                               receivable                                    $139,981       $176,035
                               Less: Unearned revenue                          23,498         29,557
                               ---------------------------------------------------------------------
                               Net investment in direct financing
                               leases                                        $116,483       $146,478
                               =====================================================================
</TABLE>
                               The following is a schedule of future minimum
                               rentals on noncancellable direct financing
                               leases at June 30, 2004





<PAGE>
                                                                        Amount
                                                                       --------
                               Six Months ending December 31, 2004     $ 36,054
                               Year Ended December 31, 2005              70,183
                               Year Ended December 31, 2006              33,744
                                                                       --------
                                                                       $139,981
                               ================================================

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 June 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 June 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 June 30, 2004 and December 31, 2003 was
                               approximately $165,000 and $422,000,
                               respectively, which is included in the
                               Partnership's notes payables on the balance
                               sheet, and the total outstanding debt at June 30,
                               2004 and December 31, 2003 related to the
                               equipment shared by the Partnership was
                               approximately $251,000 and $696,000,
                               respectively.

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

                                                                        Amount
                               ------------------------------------------------
                               Six Months ending December 31, 2004     $248,000
                               Year Ended December 31, 2005              54,000
                               Year Ended December 31, 2006              13,000
                               ------------------------------------------------

                                                                       $315,000
                               ================================================

5.  RELATED PARTY              OTHER RECEIVABLES
    TRANSACTIONS

                               As of June 30, 2004, the Partnership has a
                               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 reduced by approximately
                               $240,000 in the six months ending June 30, 2004
                               by the offsetting of equipment management and
                               acquisition fees and payments by CCC. CCC intends
                               to repay the balance of the receivable, through
                               acquisition and debt placement fees, over
                               approximately the next fiscal year, with a
                               minimum payment of $10,000 per month, commencing
                               March 1, 2004.



<PAGE>

                               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 six months ended
                               June 30, 2004 and 2003, the Partnership recorded
                               $110,000 and $153,000, 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 six months ended June 30, 2004 and 2003,
                               equipment acquisition fees of approximately
                               $1,000 were earned by the General Partner for
                               both periods.

                               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 which is subject to operating and
                               capital leases. During the six months ended June
                               30, 2004 and 2003, equipment management fees of
                               approximately $23,000 and $48,000, respectively,
                               were earned by the General Partner.

                               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 six months ended
                               June 30, 2004 and 2003, equipment liquidation
                               fees of approximately $2,000 and $22,000,
                               respectively, were earned by the General Partner.





<PAGE>

6.  NOTES PAYABLE              Notes payable consisted of the following:
<TABLE>
<CAPTION>
                                                                    JUNE 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.                       $172,045   $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.                             58,965     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.                       126,429    155,641
                                                                    --------   --------
                                                                    $357,439   $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 June 30, 2004 are as
                                follows:
                                                                                Amount
                                                                               --------
                                  Six months ending December 31, 2004          $240,367
                                  Year ended December 31, 2005                   84,006
                                  Year ended December 31, 2006                   33,066
                                                                               --------
                                                                               $357,439
                                                                               --------
</TABLE>


7.  SUPPLEMENTAL               Other noncash activities included in the
    CASH FLOW                  determination of net loss are as follows:
    INFORMATION

Six months ended June 30,                                   2004       2003
-----------------------------------------------------------------------------

Lease income, net of interest expense on
    notes payable realized as a result of
    direct payment of principal by lessee to
    bank
                                                          $360,331   $536,047
=============================================================================


<PAGE>


       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:

Six months ended June 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                        $107,356     $    -
===========================================================================

       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 June 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




<PAGE>

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 six months ended June 30,
2004 and 2003 were net proceeds received from sale of equipment totaling
approximately $67,000 and $382,000, respectively, and cash provided from
operations of approximately $63,000 and the repayment of receivables from CCC of
approximately $132,000 for the period ending June 30, 2004. The primary uses of
cash for the six months ended June 30, 2004 and 2003 were the payment of
preferred distributions to partners of approximately $231,000 and $289,000,
respectively, and capital expenditures for new equipment totaling approximately
$4,000 and $15,000, respectively. The Partnership used cash from operations of
approximately $23,000 for the six months ended June 30, 2003.

For the six month period ended June 30, 2004, the Partnership generated cash
flows from operating activities of approximately $63,000, which includes a net
loss of approximately $182,000 and depreciation and amortization expenses of
approximately $400,000. Other noncash activities included in the determination
of net income include direct payments of lease income by lessees to banks of
approximately $360,000.

For the six month period ended June 30, 2003, the Partnership used cash flows
from operating activities of $23,000, which includes net income of $299,000, a
gain on sale of equipment totaling $318,000, and depreciation and amortization
expenses of $533,000. Other noncash activities included in the determination of
net loss include direct payments of lease income by lessees to banks of
$536,000.

As of June 30, 2004, the Partnership has a 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 reduced by approximately $240,000 in the six
months ending June 30, 2004 by the offsetting of equipment management and
acquisition fees and payments by CCC. CCC intends to repay the balance of the
receivable, through acquisition and debt placement fees, over approximately the
next fiscal year, with a minimum payment of $10,000 per month, commencing March
1, 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 June 30, 2004, the Partnership had future minimum rentals on non-cancelable
operating leases of $248,000 for the balance of the year ending December 31,
2004 and $67,000 thereafter. As of June 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 June 30, 2004, the
outstanding debt was $357,000, with interest rates ranging from 5.95% to 8.75%,
and will be payable through June 2006.




<PAGE>

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 June 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 June 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 June 30, 2004 and December
31, 2003 was approximately $165,000 and $422,000, respectively, which is
included in the Partnership's notes payables on the balance sheet, and the total
outstanding debt at June 30, 2004 and December 31, 2003 related to the equipment
shared by the Partnership was approximately $251,000 and $696,000, respectively.

The Partnership has begun liquidation during the quarter ended June 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 June 30, 2004 compared to Three Months Ended June 30, 2003
  -----------------------------------------------------------------------------

For the quarter ended June 30, 2004, the Partnership recognized income of
approximately $217,000 and expenses of approximately $284,000, resulting in a
net loss of approximately $67,000. For the quarter ended June 30, 2003, the
Partnership recognized income of approximately $734,000 and expenses of
approximately $439,000, resulting in net income of approximately $295,000.

Lease income decreased by 47% to approximately $217,000 for the quarter ended
June 30, 2004, from approximately $409,000 for the quarter ended June 30, 2003,
primarily due to the fact that more lease agreements ended since the quarter
ended June 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 61% to
approximately $56,000 for the quarter ended June 30, 2004, from approximately
$144,000 for the quarter ended June 30, 2003, which is primarily attributable to
a decrease in the amount charged by CCC, a related party, to the Partnership for
the administration and operation of approximately $19,000, a decrease in
remarketing fees of approximately $28,000, a decrease in professional fees of
approximately $14,000, a decrease in due diligence expenses of approximately


<PAGE>

$9,000, a decrease in postage/shipping expenses of approximately $6,000, a
decrease in conventions of approximately $2,000 and a decrease in office
equipment rental 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 47% to approximately $11,000 for the quarter ended June
30, 2004, from approximately $21,000 for the quarter ended June 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 $196,000 for the quarter ended June 30, 2004, from
approximately $250,000 for the quarter ended June 30, 2003 due to equipment and
acquisition fees being fully depreciated/amortized and not being replaced with
new purchases.

The Partnership sold computer equipment with a net book value of approximately
$28,000 for the quarter ended June 30, 2004, for a net loss of approximately
$14,000. The Partnership sold computer equipment with a net book value of
approximately $56,000 for the quarter ended June 30, 2003, for a net gain of
approximately $324,000.

Interest expense decreased 68% to approximately $8,000 for the quarter ended
June 30, 2004 from approximately $24,000 for the quarter ended June 30, 2003,
primarily due to the decrease in debt relating to the purchase of computer
equipment.

    Six Months Ended June 30, 2004 compared to Six Months Ended June 30, 2003
    -------------------------------------------------------------------------

For the six months ended June 30, 2004, the Partnership recognized income of
approximately $450,000 and expenses of approximately $632,000, resulting in a
net loss of approximately $182,000. For the six months ended June 30, 2003, the
Partnership recognized income of approximately $1,272,000 and expenses of
approximately $973,000, resulting in net income of approximately $299,000.

Lease income decreased by 53% to approximately $450,000 for the six months ended
June 30, 2004, from approximately $952,000 for the six months ended June 30,
2003, primarily due to the fact that more lease agreements ended since the six
months ended June 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 50% to
approximately $167,000 for the six months ended June 30, 2004, from
approximately $338,000 for the six months ended June 30, 2003, which is
primarily attributable to a decrease in the amount charged by CCC, a related
party, to the Partnership for the administration and operation of approximately
$33,000, a decrease in remarketing fees of approximately $108,000, a decrease in
due diligence expenses of approximately $15,000, a decrease in postage/shipping
expenses of approximately $7,000, a decrease in conventions of approximately
$2,000 and a decrease in printing services of approximately $6,000, a decrease
in communication expenses of approximately $3,000.

The equipment management fee is approximately 5% of the gross lease revenue
attributable to equipment that is subject to operating leases. The equipment



<PAGE>

management fee decreased 53% to approximately $22,000 for the six months ended
June 30, 2004, from approximately $48,000 for the six months ended June 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
25% to approximately $400,000 for the six months ended June 30, 2004, from
approximately $533,000 for the six months ended June 30, 2003 due to equipment
and acquisition fees being fully depreciated/amortized and not being replaced
with new purchases.

The Partnership sold computer equipment with a net book value of approximately
$91,000 for the six months ended June 30, 2004, for a net loss of approximately
$24,000. The Partnership sold computer equipment with a net book value of
approximately $64,000 for the six months ended June 30, 2003, for a net gain of
approximately $318,000.

Interest expense decreased 65% to approximately $19,000 for the six months ended
June 30, 2004 from approximately $54,000 for the six months ended June 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
June 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.         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:

                            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

                         b) Report on Form 8-K: None

                                    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

August 13, 2004                           By: /s/ George S. Springsteen
---------------                              --------------------------
Date                                        George S. Springsteen
                                            President