Rotation& translation problem

I'm working on simple spacecraft simulation and I'm trying to implement spacecraft control. I can turn on engines of shuttle with space, rotate the spacecraft with w, s vertically and with a, d horizontally. But I have problem with rotation - it weirdly affects translation.

http://i.imgur.com/duyiy3i.gifv

My spacecraft control script:

 private float verticalRotation, horizontalRotation, rotationSpeed;
     private Kinematics kinematics;
     void Start()
     {
         rotationSpeed = 0.25f;
         kinematics = gameObject.GetComponent<Kinematics>();
     }
     void Update()
     {
         verticalRotation += Input.GetAxis("Vertical");
         horizontalRotation += Input.GetAxis("Horizontal");
         transform.rotation = Quaternion.Slerp(transform.rotation, Quaternion.Euler(verticalRotation * rotationSpeed, horizontalRotation * rotationSpeed, 0), Time.deltaTime);
         if (kinematics != null)
         {
             if (Input.GetKey(KeyCode.Space))
                 kinematics.EngineAcceleration = 0.0025f;
             else
                 kinematics.EngineAcceleration = 0;
         }
     }

And kinematics script:

 private float initialVelocity, velocity, acceleration, engineAcceleration, gravitationalAcceleration, motionTime;
     private Vector3 initialPosition, position;
     public float EngineAcceleration
     {
         set
         {
             engineAcceleration = value;
         }
     }
     void Start()
     {
         initialPosition = transform.position;
         position = initialPosition;
     }    
     void FixedUpdate()
     {
         UpdateAcceleration();
         UpdateVelocity();
         UpdateMotionTime();
         UpdatePosition();
     }
     void UpdateAcceleration()
     {
         acceleration = engineAcceleration + gravitationalAcceleration;
     }
     void UpdateVelocity()
     {
         velocity = initialVelocity + (acceleration * motionTime);
     }
     void UpdateMotionTime()
     {
         if (velocity != 0 || acceleration != 0)
             motionTime += Time.deltaTime;
         else
         {
             motionTime = 0;
             initialPosition = transform.position;
         }
     }
     void UpdatePosition()
     {
         position.x = initialPosition.x + (((initialVelocity + velocity) * motionTime * 0.5f) * transform.up.x);
         position.y = initialPosition.y + (((initialVelocity + velocity) * motionTime * 0.5f) * transform.up.y);
         position.z = initialPosition.z + (((initialVelocity + velocity) * motionTime * 0.5f) * transform.up.z);
         transform.position = position;
     }

I have to use my own physics. So please don't give me answers with unity physics methods.