I already disabled
php_admin_flag engine Off
in /etc/apache2/mods-enabled/php.conf and still PHP files won't work. I've encountered similar problem with SWF files already and the cause was in mime-types. So I suspect that current problem may be related. Still, I don't know how to change mime-type for .php?
It appears it all was because of me trying to run .php files outside DocumentRoot directory, which is /var/www/html meaning it's protected and I would either run IDE (for development) in root mode or change DocumentRoot option.