<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 September 30, 1996

                                          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 indentification 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 / /

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PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS

                     COMMONWEALTH INCOME & GROWTH FUND II

                                BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                            (AUDITED)
                                                           SEPTEMBER 30,   DECEMBER 31,
                                                              1996             1995
                                                           ----------------------------
<S>                                                        <C>              <C>
ASSETS
Cash and cash equivalents                                  $1,881,689       $  251,776
Lease income receivable                                        88,428           47,119
Other receivables and deposits                                 10,377            9,576

Computer equipment, at cost                                 4,780,075        2,998,297
Accumulated depreciation                                     (794,781)         (95,827)
                                                           ---------------------------
                                                            3,985,294        2,902,470
Organization costs and deferred expenses, net of
   accumulated amortization of $69,889 
   in 1996 and $12,130 in 1995                                262,764          162,466
                                                           ---------------------------
Total assets                                               $6,228,552       $3,373,407
                                                           ---------------------------
                                                           ---------------------------
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable                                           $   51,186       $   30,999
Accounts payable - General Partner                             17,092                -
Accounts payable - Commonwealth Capital Corp.                       -          148,141
Unearned lease income                                          74,743           37,746
Computer equipment payable                                    256,422                -
                                                           ---------------------------
Total liabilities                                             399,443          216,886

Partners' capital:
   General partner                                              1,000            1,000
   Limited partners                                         5,828,109        3,155,521
                                                           ---------------------------
Total partners' capital                                     5,829,109        3,156,521
                                                           ---------------------------
Total liabilities and partners' capital                    $6,228,552       $3,373,407
                                                           ---------------------------
                                                           ---------------------------
</TABLE>

SEE ACCOMPANYING NOTES.

<PAGE>


                      COMMONWEALTH INCOME & GROWTH FUND II

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                                     FOR THE PERIOD
                                                                                                   SEPTEMBER 22, 1995
                                                          THREE MONTHS ENDED    NINE MONTHS ENDED   (COMMENCEMENT OF
                                                             SEPTEMBER 30,        SEPTEMBER 30,      OPERATIONS) TO
                                                           1996         1995          1996         SEPTEMBER 30, 1995
                                                           ----         ----          ----         ------------------
<S>                                                      <C>          <C>           <C>                 <C>
INCOME:
   Lease                                                 $325,441     $  2,793      $771,037            $  2,793
   Interest and other                                      22,662            -        46,562                   -
                                                         --------------------------------------------------------
                                                          348,103        2,793       817,599               2,793
EXPENSES:
   Operating, excluding depreciation                        2,057          100        15,093                 100
   Equipment management fee - General Partner              16,272            -        38,552                   -
   Depreciation                                           283,753            -       698,953                   -
   Amortization of organization costs and 
      deferred expenses                                    22,872        1,301        57,759               1,301
                                                         --------------------------------------------------------
                                                          324,954        1,401       810,357               1,401
                                                         --------------------------------------------------------
Net income                                               $ 23,149     $  1,392      $  7,242            $  1,392
                                                         --------------------------------------------------------
                                                         --------------------------------------------------------
Net income per equivalent limited 
    partnership unit                                     $   0.07     $   0.01      $   0.03            $   0.01
                                                         --------------------------------------------------------
                                                         --------------------------------------------------------
Weighted average number of equivalent limited 
   partnership units outstanding during the period        326,478      126,118       273,882             126,118
                                                         --------------------------------------------------------
                                                         --------------------------------------------------------
</TABLE>

SEE ACCOMPANYING NOTES.

<PAGE>


                      COMMONWEALTH INCOME & GROWTH FUND II

                         STATEMENT OF PARTNERS' CAPITAL

<TABLE>
<CAPTION>
                                             GENERAL      LIMITED
                                             PARTNER     PARTNERS'       TOTAL
                                            -------------------------------------
<S>                                          <C>        <C>           <C>
Partners' capital - December 31, 1995        $ 1,000    $3,155,521    $3,156,521
   Contributions                                   -     1,339,180     1,339,180
   Offering costs                                  -      (155,233)     (155,233)
   Net income (loss)                           1,097       (15,719)      (14,622)
   Distributions                              (1,097)     (108,647)     (109,744)
                                            ------------------------------------
Partners' capital - March 31, 1996             1,000     4,215,102     4,216,102
   Contributions                                           873,660       873,660
   Offering costs                                  -       (95,666)      (95,666)
   Net income                                  1,387        (2,672)       (1,285)
   Distributions                              (1,387)     (137,297)     (138,684)
                                            ------------------------------------
Partners' capital - June 30, 1996              1,000     4,853,127     4,854,127
   Contributions                                         1,255,420     1,255,420
   Offering costs                                  -      (137,799)     (137,799)
   Net income (loss)                           1,658        21,491        23,149
   Distributions                              (1,658)     (164,130)     (165,788)
                                            ------------------------------------
Partners' capital - September 30, 1996       $ 1,000    $5,828,109    $5,829,109
                                            ------------------------------------
                                            ------------------------------------
</TABLE>

SEE ACCOMPANYING NOTES.

<PAGE>


                      COMMONWEALTH INCOME & GROWTH FUND II

                            STATEMENTS OF CASH FLOWS

         For the nine months ended September 30, 1996 and for the period
       September 22, 1995 (commencement of operations) to September 30, 1995

<TABLE>
<CAPTION>
                                                                1996           1995
                                                           ----------------------------
<S>                                                        <C>             <C>
OPERATING ACTIVITIES 
Net income                                                 $     7,242     $    1,392
Adjustments to reconcile net income to net cash
   provided by operating activities:
      Depreciation and amortization                            756,713          1,301
      Other noncash activities included in the
        determination of net income                             (4,290)             -
      Changes in operating assets and liabilities:
        Lease income receivable                                (41,309)        (2,793)
        Other receivables                                         (801)             -
        Accounts payable                                        20,187              -
        Accounts payable - General Partner                      17,092              -
        Equipment payable                                       (7,076)             -
        Unearned lease income                                   36,997              -
                                                           ----------------------------
Net cash provided by (used in) operating activities            784,755           (100)

INVESTING ACTIVITIES
Capital expenditures                                        (1,513,990)             -
Payment of computer equipment payable                         (148,141)             -
Increase in organization costs and
   deferred expenses                                          (158,057)      (120,557)
                                                           ----------------------------
Net cash used in investing activities                       (1,820,188)      (120,557)

FINANCING ACTIVITIES
Partners' contributions                                      3,468,260      2,540,380
Offering costs                                                (388,698)      (293,657)
Distributions to partners                                     (414,216)             -
                                                           ----------------------------
Net cash provided by financing activities                    2,665,346      2,246,723
                                                           ----------------------------
Net increase in cash and cash equivalents                    1,629,913      2,126,066
Cash and cash equivalents at beginning of period               251,776              -
                                                           ----------------------------
Cash and cash equivalents at end of period                 $ 1,881,689     $2,126,066
                                                           ----------------------------
                                                           ----------------------------
</TABLE>

SEE ACCOMPANYING NOTES.

<PAGE>

                      Commonwealth Income & Growth Fund II

                         Notes to Financial Statements

                              September 30, 1996

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, 1995.

NET LOSS PER EQUIVALENT LIMITED PARTNERSHIP UNIT

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

SUBSEQUENT EVENT

On October 7, 1996 and November 5, 1996 subscriptions from investors totaling 
$203,060 and $359,740, respectively, were released by the escrow agent and 
accepted by the Partnership.  The net proceeds to the Partnership available 
for investment in computer equipment after payment of offering expenses and 
the equipment acquisition fees were $171,820 and $304,395, respectively.

RECLASSIFICATION

Certain balances in the prior period financial statements have been 
reclassified to conform with the current period presentation.


<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.  Through 
September 30, 1996, subscribers owning an additional 231,242 Units were 
admitted as Limited Partners.

The Partnership's primary sources of capital for the nine months ended 
September 30, 1996 and for the period ended September 30, 1996, were from 
Partners' contributions of $3,468,000 and $2,540,000, respectively, and cash 
from operations for the quarter ended September 30, 1996 of $785,000.  The 
primary uses of cash  for the nine months ended September 30, 1996 were for 
capital expenditures for new equipment totaling $1,514,000, the payment of 
offering costs of $389,000, the payment of preferred distributions to 
partners of $414,000, the payment of accounts payable of $148,000 to Com Cap 
Corp. for the purchase of Equipment, and the payment of acquisition fees of 
$158,000.

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 September 30, 1996 and December 31, 1995 
the Partnership had approximately $1,882,000 and $252,000, 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 September 30, 1996, the Partnership had future minimum 
rentals on noncancellable operating leases of $353,000 for the year ending 
December 31, 1996 and $2,772,000, 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 September 30, 1996, the Partnership recognized income 
of $348,000 and expenses of $325,000, resulting in  net income of $23,000.

For the nine months ended September 30, 1996, the Partnership expended 
approximately $1,514,000 in cash to acquire six leases, which generated 
approximately $150,000  in revenue.

Interest income for the quarter ended September 30, 1996 of $23,000 is the 
result of capital contributions temporarily being invested in money market 
accounts until being utilized for equipment purchases.


<PAGE>


                      Commonwealth Income & Growth Fund II

Operating expenses, excluding depreciation, for the quarter ended September 
30, 1996 of $2,000, primarily consist of accounting, legal, and outside 
service fees.

The equipment management fee for the quarter ended September 30, 1996 of 
$16,000, is equal to 5% of the gross lease revenue attributable to equipment 
which is subject to operating leases.

Depreciation and amortization expenses for the quarter ended September 30, 
1996 of $307,000 consist of depreciation on computer equipment, amortization 
of organizational costs, and equipment acquisition fees.


<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