The objectives of this paper are twofold. First, to point out the significance of certain results on stochastic processes in computing the channel capacity for flat fading wireless channels. Next, to design an optimal encoding and decoding strategies for general sources, when the channel is perfectly known to both transmitter and receiver. We give an optimal encoding and decoding scheme with noiseless feedback achieving the channel capacity and consider the effect of feedback on decoding error. It turns out that the optimal encoding function has two parts: one part behaves as power control and the other part represents the decoding error.