<PAGE>

                          UNITED STATES
                SECURITIES AND EXCHANGE COMMISSION
                      Washington, DC  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, 1997

                                or

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


  For the transition period from         to          .
                                ---------  ----------

                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 No.)
incorporation or organization)


                    1160 West Swedesford Road
                   Berwyn, Pennsylvania  19312
  (Address, including zip code, of principal executive offices)

                          (610) 647-6800
       (Registrant's telephone number including area code)

Indicate by check mark whether the registrant (1) has filed all reports to be 
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during 
the preceding 12 months (or for such shorter period that the registrant was 
required to file such reports), and (2) has been subject to such filing 
requirements for the past 90 days:

          YES   [ x ]                  NO   [   ]

<PAGE>

Part I: FINANCIAL INFORMATION
Item 1: Financial Statements
 
                             Commonwealth Income & Growth Fund II
 
                                      BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                                                      (AUDITED)
                                                                                        JUNE 30,     DECEMBER 31,
                                                                                          1997           1996
                                                                                      -------------  ------------
<S>                                                                                   <C>            <C>
Assets
Cash and cash equivalents...........................................................  $   2,628,639   $2,552,352
Lease income receivable.............................................................        117,011       80,014
Accounts receivable--General Partner................................................         50,433       --
Other receivables and deposits......................................................         41,010       19,551
                                                                                      -------------  ------------
                                                                                          2,837,093    2,651,917
Computer equipment, at cost.........................................................      9,018,778    4,780,075
Accumulated depreciation............................................................     (1,795,034)  (1,093,535)
                                                                                      -------------  ------------
                                                                                          7,223,744    3,686,540

Organization costs and deferred expenses, net of
 accumulated amortization of $143,921 for 1997
 and $96,375 for 1996...............................................................       341,358       276,197
                                                                                      -------------  ------------
Total assets........................................................................  $  10,402,195   $6,614,654
                                                                                      -------------  ------------
                                                                                      -------------  ------------
Liabilities and partners' capital
Accounts payable....................................................................  $      56,183   $   92,954
Unearned lease income...............................................................         94,882       89,780
Payables for computer equipment.....................................................      3,151,332       --
                                                                                      -------------  ------------
Total liabilities...................................................................      3,302,397      182,734

Partners' capital:
  General partner...................................................................          1,000        1,000
  Limited partners..................................................................      7,098,798    6,430,920
                                                                                      -------------  ------------
Total partners' capital.............................................................      7,099,798    6,431,920
                                                                                      -------------  ------------
Total liabilities and partners' capital.............................................  $  10,402,195   $6,614,654
                                                                                      -------------  ------------
                                                                                      -------------  ------------
</TABLE>
 
See accompanying notes.
 
<PAGE>

                      COMMONWEALTH INCOME & GROWTH FUND II
 
                            STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED       SIX MONTHS ENDED
                                                                          JUNE 30,                JUNE 30,
                                                                   ----------------------  ----------------------
<S>                                                                <C>         <C>         <C>         <C>
                                                                      1997        1996        1997        1996
                                                                   ----------  ----------  ----------  ----------
Income:
  Lease..........................................................  $  476,392  $  240,025  $  844,347  $  445,596
  Interest & other...............................................      39,484      15,136      76,439      23,900
                                                                   ----------  ----------  ----------  ----------
                                                                      515,876     255,161     920,786     469,496
Expenses:
  Operating, excluding depreciation..............................      13,000       6,837      15,318      13,036
  Equipment management fee--General Partner......................      23,819      12,001      42,217      22,280
  Depreciation...................................................     408,373     219,826     727,022     415,200
  Amortization of organization costs and deferred expenses.......      20,766      17,782      50,268      34,887
  Loss on sale of computer equipment.............................      31,955      --          31,955      --
                                                                   ----------  ----------  ----------  ----------
                                                                      497,913     256,446     866,780     485,403
                                                                   ----------  ----------  ----------  ----------
Net (loss) income................................................  $   17,963  $   (1,285) $   54,006  $  (15,907)
                                                                   ----------  ----------  ----------  ----------
                                                                   ----------  ----------  ----------  ----------
Net (loss) income per equivalent limited partnership unit........  $     0.04  $    (0.00) $     0.12  $    (0.06)
                                                                   ----------  ----------  ----------  ----------
                                                                   ----------  ----------  ----------  ----------
Weighted average number of equivalent limited partnership units
  outstanding during the periods.................................     454,824     276,102     441,440     247,295
                                                                   ----------  ----------  ----------  ----------
                                                                   ----------  ----------  ----------  ----------
</TABLE>
 
See accompanying notes.

<PAGE>
                          COMMONWEALTH INCOME & GROWTH FUND II

                            STATEMENT OF PARTNERS' CAPITAL

<TABLE>
<CAPTION>
                                                     GENERAL        LIMITED 
                                                     PARTNER        PARTNER         GENERAL        LIMITED
                                                      UNITS          UNITS          PARTNER        PARTNER        TOTAL
                                                 ---------------  ------------  ---------------  ------------  ------------
<S>                                              <C>              <C>           <C>              <C>           <C>
Partners' capital--December 31, 1995...........        50            183,947          $1,000       3,155,521  $  3,156,521
Contributions..................................        --            218,572             --       4,371,440     4,371,440
Offering costs.................................                                          --        (487,266)     (487,266)
Net income (loss)..............................                                        6,080          (6,810)         (730)
Distributions..................................                                       (6,080)       (601,965)     (608,045)
                                                 ---------------  ------------  ---------------  ------------  ------------
    Partners' capital-December 31, 1996........        50            402,519           1,000       6,430,920     6,431,920

Contributions..................................        --             37,602             --          752,040       752,040
Offering costs.................................                                          --          (82,348)      (82,348)
Net income.....................................                                        2,132          33,911        36,043
Distributions..................................                                       (2,132)       (211,022)     (213,154)
                                                 ---------------  ------------  ---------------  ------------  ------------
    Partners' capital--March 31, 1997..........        50            440,121           1,000       6,923,501     6,924,501
                                                                              
Contributions..................................        --             21,696             --          433,745       433,745
Offering costs.................................                                          --          (47,332)      (47,332)
Net income.....................................                                        2,291          15,672        17,963
Distributions..................................                                       (2,291)       (226,788)     (229,079)
                                                 ---------------  ------------  ---------------  ------------  ------------
    Partners' capital--June 30, 1997...........        50            461,817          $1,000     $ 7,098,798   $ 7,099,798
                                                 ---------------  ------------  ---------------  ------------  ------------
                                                 ---------------  ------------  ---------------  ------------  ------------
</TABLE>

See accompanying notes.
 
<PAGE>

                        COMMONWEALTH INCOME & GROWTH FUND II

                              STATEMENTS OF CASH FLOWS

                  FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996

<TABLE>
<CAPTION>
                                                                                            1997         1996
                                                                                         -----------  -----------
<S>                                                                                      <C>          <C>
Operating activities
Net (loss) income......................................................................  $    54,006  $   (15,907)
Adjustments to reconcile net (loss) income to net cash provided by operating
  activities:
  Depreciation and amortization........................................................      777,290      450,087
  Loss on sale of computer equipment...................................................       31,955        --
  Other non-cash activities included in determination of net (loss) income.............      (77,968)       --
  Changes in operating assets and liabilities:
  Lease income receivables.............................................................      (36,997)     (19,402)
  Interest and other receivables.......................................................      (71,892)       3,792
  Accounts payable.....................................................................      (36,771)     (10,329)
  Accounts payable -- Commonwealth Capital Corp. ......................................         --       (147,979)
  Unearned lease income................................................................        5,102       26,337
  Organization cost paid to the General Partner........................................      (12,451)     (23,235)
                                                                                         -----------  -----------
Net cash provided by operating activities..............................................      632,274      263,364
Investing activities
Capital expenditures...................................................................   (1,077,466)    (963,562)
Net proceeds from sale of computer equipment...........................................       10,585        --
Equipment acquisition fees paid to the General Partner.................................      (79,855)     (74,388)
                                                                                         -----------  -----------
Net cash used in investing activities..................................................   (1,146,736)  (1,037,950)
                                                                                         -----------  -----------
Financing activities
Partners' contributions................................................................    1,185,785    2,212,840
Offering costs.........................................................................     (129,680)    (212,377)
Offering costs paid to the General Partner.............................................      (23,123)     (43,150)
Distributions to Partners..............................................................     (442,233)    (248,428)
                                                                                         -----------  -----------
Net cash provided by financing activities..............................................      590,749    1,708,885
                                                                                         -----------  -----------
Net increase in cash and cash equivalents..............................................       76,287      934,299
Cash and cash equivalents at begining of year..........................................    2,552,352      251,776
                                                                                         -----------  -----------
Cash and cash equivalents at end of period.............................................  $ 2,628,639  $ 1,186,075
                                                                                         -----------  -----------
                                                                                         -----------  -----------
</TABLE>

See accompanying notes.

<PAGE>

                  Commonwealth Income & Growth Fund II

                    Notes to Financial Statements

                           June 30, 1997



Basis of Presentation

The financial information presented as of any 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 Commonwealth Income & Growth Fund II (the "Partnership"), but 
does not include all disclosures required by generally accepted accounting 
principles.  In the opinion of management, all adjustments, consisting only 
of normal recurring adjustments, necessary for a fair presentation of the 
financial information for the periods indicated have been included.  For 
further information regarding the Partnership's accounting policies, refer to 
the financial statements and related notes included in the Partnership's 
annual report on Form 10-K for the year ended December 31, 1996.

Net (Loss) Income per Equivalent Limited Partnership Unit

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

<PAGE>

                Commonwealth Income & Growth Fund II

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


Liquidity and Capital Resources

The Partnership satisfied its minimum offering requirements and commenced 
operations on September 22, 1995.  On that date, subscribers for 126,118 
Units were admitted as Limited Partners of the Partnership.  On May 12, 1997, 
the Partnership terminated its offering of Units with 461,817 ($9,235,185) 
Units sold.

The Partnership's primary sources of capital for the six months ended June 
30, 1997 and 1996, were from Partners' contributions of $1,186,000  and 
$2,213,000, respectively, and cash from operations for the quarter ended June 
30, 1997 and 1996 of $645,000  and $435,000, respectively.  The primary uses 
of cash  for the six months ended June 30, 1997 and 1996 were for capital 
expenditures for new equipment totaling $1,077,000 and $964,000, 
respectively, the payment of offering costs of $192,000 and $276,000, 
respectively, the payment of preferred distributions to partners of $442,000 
and $248,000, respectively, and the payment of acquisition fees of $53,000 
and $74,000, respectively.  For the quarter ended June 30, 1996, the 
Partnership made a payment of accounts payable of $148,000 to Com Cap Corp. 
for the purchase of Equipment.

Currently, Partners' contributions and rental income from the Partnership's 
leases are invested in money market accounts investing directly in treasury 
obligations pending the Partnership's use of such funds to purchase 
additional computer equipment, to pay Partnership expenses or to make 
distributions to the Partners.  At June 30, 1997 and December 31, 1996 the 
Partnership had approximately $2,629,000 and $2,552,000, respectively, 
invested in these money market accounts.

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, 1997, the Partnership had future minimum rentals on 
noncancellable operating leases of $1,618,000 for the year ending December 
31, 1997 and $5,523,000 , thereafter. The Partnership intends to continue 
purchasing additional computer equipment with existing cash, as well as when 
future cash becomes available.  In addition, the Partnership may incur debt 
in purchasing computer equipment after the net proceeds of the Offering are 
fully invested in Equipment.

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 also 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.

Results of Operations

For the quarter ended June 30, 1997, the Partnership recognized income of 
$516,000 and expenses of $498,000, resulting in net income of $18,000.   For 
the quarter ended March 31, 1997, the Partnership recognized income of 
$405,000 and expenses of $369,000, resulting in  net income of $36,000.

Lease income increased by 98% from $240,000 for the quarter ended June 30, 
1996 to $476,000 for the quarter ended  June 30, 1997, primarily due to 
utilizing cash available from Partners' contributions for the purchase of 
Equipment, which in turn generated more lease income.   During the six months 
ended June 30, 1997, the Partnership expended $1,077,000 and incurred a 
computer equipment payable of $3,151,000 to acquire five leases, which 
generated approximately $139,000  in revenue.

<PAGE>

Interest income increased  161% from $15,000 for the quarter ended June 30, 
1996 to $39,000  for the quarter ended  June 30, 1997. This increase is the 
result of capital contributions temporarily being invested in money market 
accounts until being utilized for equipment purchases.  In addition, the 
Partnership recognized a loss on sale of computer equipment of $32,000 for 
the quarter ended June 30, 1997.

Operating expenses, excluding depreciation, primarily consist of accounting, 
legal, and outside service fees.  The 90% increase from approximately $7,000 
for the quarter ended June 30, 1996 to $13,000 for the quarter ended June 30, 
1997 is attributable to an increase in outside services fees.

The equipment management fee is equal to 5% of the gross lease revenue 
attributable to equipment which is subject to operating leases.   The 
equipment management fee increased 98% from approximately $12,000 for the 
quarter ended  June 30, 1996, to $24,000 for the quarter ended  June 30, 
1997, which is consistent with the increase in lease income.

Depreciation and amortization expenses consist of depreciation on computer 
equipment, amortization of organizational costs, and equipment acquisition 
fees.   The expenses increased 86% from approximately $220,000 for the 
quarter ended June 30, 1996, to $408,000 for the quarter ended June 30, 1997, 
which is attributable to the purchase of approximately $4,307,000 in 
additional equipment.

For the six month period ended June 30, 1997, the Partnership generated cash 
flow from operating activities of $645,000, which includes net income of 
$54,000, and depreciation and amortization expenses of $777,000.  Other 
noncash activities included in the determination of net income includes lease 
income paid to original lessors in lieu of cash payments for computer 
equipment of $78,000.
   
For the six month period ended June 30, 1996, the Partnership generated cash 
flows from operating activities of $435,000, which includes a net loss of 
$16,000, and depreciation and amortization expenses of $450,000.

<PAGE>


               Commonwealth Income & Growth Fund II

Part II:   OTHER INFORMATION

     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:   None

                 b)   Report on Form 8-K:   None

<PAGE>

                            SIGNATURE


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

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



-------------       By:
Date                   -------------------------
                       David A. Kintzer, CPA
                       Chief Financial Officer