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I have just started to learn about the whole deal of PHP, MySql, and it's connections to front-end development. While doing this I found that I cannot execute a PHP file unless and until it is inside the /var/www/html directory. I have found out about this solution from multiple sources including askubuntu, but I could never find the reason as to why this is so. So does this mean that a PHP file always has to be inside this specific directory? Can I do anything to make a PHP file inside say, my Documents folder to run successfully instead of being "Save"-ad by Mozilla?
Please help.

Because it is not configured to do so, by default Apache will only serve php file inside /var/www/html directory.

You can set Apache to look content anywhere within your system, in order to achieve such thing you need to change Apache setting, they are mostly located on /etc/apache2.

Please note, that this only applies for Ubuntu 14.04 LTS and newer releases.

In my Ubuntu 14.04 LTS, the document root was set to /var/www/html.
It was configured in the following file:

/etc/apache2/sites-available/000-default.conf

So just do a

sudo nano /etc/apache2/sites-available/000-default.conf

and change the following line to what you want:

DocumentRoot /var/www/html

Also do a

sudo nano /etc/apache2/apache2.conf

and find this

<Directory /var/www/html/>    Options Indexes FollowSymLinks  AllowOverride None  Require all granted

</Directory>

and change /var/www/html to your preferred directory

and save it.

After you saved your changes, just restart the apache2 webserver and
you'll be done :)

sudo service apache2 restart 

---

If you prefer a graphical text editor, you can just replace the sudo nano by a gksu gedit.

_{Taken from: https://stackoverflow.com/a/23175981}

The reason php files not possible to open outside of document root is security. Web server always limited to some folder and its subfolders.

You can setup apache to look at few different folders, depending on url, like http://localhost or http://someother.localhost pointing to different folders.

To do so, first you need to edit 000-defailt.conf, the change is:

ServerName  localhost

ServerAlias localhost

Then make copy of 000-default.conf to 001-someother.conf and edit it like following:

<VirtualHost *:80>

  ServerAdmin webmaster@localhost

    DocumentRoot /home/leonid/Web/SomeotherRoot

    ServerName  someother.localhost

    ServerAlias someother.localhost

    <Directory "/home/leonid/Web/SomeotherRoot">

      AllowOverride All

      Require local

      # ^ this will limit connections to only local

    </Directory>

    # Available loglevels: trace8, ..., trace1, debug, info, notice, warn,

    # error, crit, alert, emerg.

    LogLevel error

</VirtualHost>

After that you need to make someother.localhost resolve to server ip, edit /etc/hosts:

127.0.0.1   localhost   *.localhost

...other lines

Finally you need to enable new configuration file by:

sudo a2ensite 001-someother.conf

sudo systemctl reload apache2

Note: Example above is only for local site, accessible only locally.

I wrote script what creates configurations like this in a few clicks, but better to understood how its done before using script. Github.