A couple of things we've learned over the years...
1) The rules should be clearly defined and consistent. The consequences for breaking rules should be as well.
2) Only offer explanations that are short and age-appropriate if the child is asking why calmly.
3) No negotiations.
That's pretty much it. Obviously you have to decide what type of consequences are appropriate for your family and for your children. I never found time-outs to be particularly useful in our house, but others swear by it. Plus, now that my children are both old enough (6 & almost 8) we can do grounding from various items/privileges, which works really well for us.
I've found that the better *I* stick to the rules and not let them get away with things, the easier it all is. Also, when the rules are clearly defined, I find there's less anger and yelling. Typically the anger and yelling comes from ignoring/letting bad behavior slide until you just can't stand it anymore. If you instead nip things in the butt right when they start you can handle it with more patience.
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One other thing we found that really helped our DS7 was offering choices. We were always okay with either option, and neither option was something he clearly wasn't going to choose (ie. You can either make your bed or be grounded). We found the consistently offering choices on even silly things (do you want the blue cup or the green cup?) helped him immensely.
